In its latest fiscal year performance, Bunna Bank joined a hoard of competitors in posting a rise in net profits, positioning it as a noteworthy contender within the banking industry. However, its financial performance placed it in a peculiar middle-tier position — above Berhan Bank but trailing behind competitors such as Abay and Oromia banks.

Despite the uptick in profits, shareholders experienced a decline in Earnings Per Share (EPS), with a drop to 236.44 Br from the previous year but above Berhan Bank (156 Br) while it fell short of Oromia Bank (324 Br) and Abay Bank (360 Br). A critical indicator of profitability on a per-share basis, Bunna's 23.6pc in EPS was the second largest rate over the past decade, although lower than the average of 38.4pc across 15 private banks posted in 2021/22, revealing room for growth in maximising shareholders’ value.

The Bank's executives attributed the decrease to strategic capital infusions to reinforce its resource base amid rising operational costs. While the move is believed to help Bunna consolidate its capital structure, analysts caution operational efficiency and cost management strategies in a period marked by industry repositioning.

The Bank ended its operations with a 6.6pc climb in net profits to 949.21 million Br, almost double the profit Berhan Bank reported but lagging behind Abay's 1.55 billion Br and Oromia's 1.58 billion Br. Although it appears to be dwarfed by Awash Bank's 6.9 billion Br profit (the industry's largest for private banks), Bunna Bank's performance is noteworthy, defying its smaller scale and contributing to the industry's aggregated profit of 22.2 billion Br in the latest operational year.

Under the stewardship of Mulugeta Alemayehu, its president, Bunna Bank's strategic shift towards acquiring technology and expanding its footprint was notable.

With an accounting and business administration background from Addis Abeba University, Mulugeta began his career at the state-owned Commercial Bank of Ethiopia (CBE) and helmed the presidency at Bunna Bank in 2018. Under his watch, Bunna Bank has seen notable increases in its interest income, which surged by 53.4pc to 5.63 billion Br.

A diverse portfolio of loans, advances, treasury bonds, and other financial instruments drove this growth. The total loans, advances, and interest-free financing went up 35.6pc to 34.17 billion Br. Despite the upticks, Bunna's loan portfolio only exceeded Berhan's 27.35 billion Br, markedly less than Oromia's 41.56 billion Br and a tad bit lower than Abay's 36.47 billion Br.

While Bunna Bank’s provision for impairment of loans and other assets increased by 29.4pc to 160.2 million Br, the total deposit reached 34.35 billion Br, rising by 34pc.

The loan-to-deposit ratio of Bunna Bank increased to 99.5pc from 93.4pc. While generating interest income, analysts warned that a high loan-to-deposit ratio could pressure the Bank's liquidity position, recalling the borrowing of 511.11 million Br from the central bank.

Mulugeta concured.

"We're also planning to collect disbursed loans aggressively," he said.

Following the same trend, the Bank's income from fees and commissions rose by 14.3pc to 811.98 million Br, complemented by a 35.5pc increase in gains from foreign exchange dealings from last year's 82 million Br, a rare accomplishment in an industry besieged by forex crunches.

"The management should be appreciated," said Abdulmenan Mohammed (PhD), a London-based financial analyst.

These achievements, however, are set against a backdrop of broader industry-wide impediments, including the disparity between official and parallel market rates, which have impacted foreign exchange earnings.

Bunna’s Board Chairman, Alemayehu Sewagen, raised these problems during the shareholders' annual general assembly in December at the Millennium Hall on Africa Avenue (Bole Road). He pointed to the adverse effects on the Bank's performance, emphasising the need for strategic adjustments to overcome limitations.

A seasoned banker with two decades of experience, Mulugeta's management is characterised by an ambitious vision, steering away from conventional banking practices of deposit-centred towards a more diversified approach. This includes a significant expansion of the bank's branch network, with 122 new branches added, totalling 465. He disclosed his desire to balance expansion with cost control as a crucial move forward, integrating technology and staff efficiency.

While these expansions contributed to the Bank's increased footprint, they also increased operational costs. A significant portion of these expenses was allocated to personnel, with costs surging to over two billion Birr, surpassing that of several competitors but falling slightly below Oromia Bank’s 2.32 billion Br.

Abdulmenan voiced concerns over this trend, urging the Bank's management to closely check its expenditure framework to ensure sustainability and profitability in the long run.