Capital Increase Dampens Dividend at Bunna

The Bank performed well by increasing credit, treasury income by 63pc

February 9 , 2019
By FASIKA TADESSE( FORTUNE STAFF WRITER )


Although profits at the nine-year-old Bunna International Bank climbed by one-third, shareholder return remained at the same level as the previous fiscal year.

Last year, the Bank netted 315.3 million Br in profits, a 33pc increase. However, the earnings per share increased by only two Birr to 286 Br.

The earnings per share were depressed due to the huge increase made toward paid-up capital, according to Abdulmenan Mohammed, a financial statement analyst with a decade and a half of experience.

Bunna increased its paid-up capital by 46pc to 1.47 billion Br, thus making the private bank the 10th-most capitalised bank out of 16 banks operating in the country.

Abdulmenan does not approve of this scenario, stating that, “Bunna needs to scrutinize its capitalisation policy.”

The year ended successfully for the bank, which reached 94pc of the targets on its balance sheet and income statement for the fiscal year, according to Tibebu Eshete, chairperson of the Bank's board of directors.



"This was a tremendous and encouraging result despite the 15pc devaluation of the Birr. Subsequent tangible impacts and changes have been brought in the macro and microeconomic environment including the revision of various directives by the supervisory body," remarked Tibebu in the annual report.

Despite the fall in earnings per share, the Bank managed to boost its income from diversified sources. Increased income from financial intermediation operations and other areas of business have helped the firm to improve its profit performance.

Interest on loans, advances and treasury bonds soared by 63pc to 1.03 billion Br. Non-interest income and gains from foreign exchange transactions increased by 25pc to 63.19 million Br, and fees and commissions increased by 35pc to 260.75 million Br.

“Achieving these increases in all areas of income generating activities is impressive,” commented Abdulmenan.


Last fiscal year, most of the private banks reported that their forex dealing slumped or stagnated. Bunna's total foreign currency mobilisation reached 121.3 million dollars.

As its recorded increases, expenses at Bunna expanded.




Interest paid on deposits went up by 53pc to 389.4 million Br. Other operating expenses have also risen by a staggering rate of 40pc to 533.1 million Br.

Provision for impairment of loans and other assets soared to 42.72 million Br from negative 28.88 million Br.

The provision for loans and other asset impairment needs the attention of the management of Bunna, according to Abdulmenan.

Bunna disbursed loans and advances of 6.84 billion Br, an increase of 32pc, while mobilising deposits of 9.95 billion Br, an increase of 32pc.

Total resources mobilised by the banking industry last fiscal year reached 298.2 billion Br. Out of that total, the private banking industry accounts for a 37.8pc share, while the balance was mobilised by the state-owned giant, Commercial Bank of Ethiopia.

Bunna, which commenced its operations on October 10, 2009, with subscribed capital of 308 million Br and paid-up capital of 156 million Br, did well in maintaining a high loan-to-deposit ratio, keeping it on par with the previous year at 69pc.


Bunna invested 2.87 billion Br in treasury bonds, accounting for 22pc of total assets, and 29pc of total deposits made at the Bank. Total assets expanded by 32pc to 13.02 billion Br. This ratio is a slight increase from the preceding year.

Liquidity analysis indicates that the liquidity level of Bunna has improved in value terms.

Its cash and bank balances increased by 29pc to 2.67 billion Br, whereas its liquid assets to total assets ratio fell slightly by half a percentage point from 21pc. Liquid assets to total liabilities remained the same at 24pc.

“Bunna has a good liquidity condition,” said Abdulmenan.

Bunna's capital adequacy ratio increased to 26pc from 23.9pc.

As Bunna has a strong capital profile, it should use its capital base efficiently, recommended Abdulmenan.



PUBLISHED ON Feb 09,2019 [ VOL 19 , NO 980]



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