Cooperative Bank of Oromia (Coop Bank) finished a demanding year in 2023/24, holding on to moderate profitability and widening its presence, manifestations of the Bank's strengths and recent struggles. Around 30pc of its branches in Oromia and Amhara regional states operated below capacity due to security and economic difficulties, yet shareholders appeared to understand the external constraints.

Management attributed the decline to sluggish income growth that failed to keep up with overall expenses, though total revenue still reached 19.03 billion Br, a 7.5pc rise over the previous period. Interest income climbed by 15pc to 14.6 billion Br, but revenue from Murabaha financing slid by 17.9pc to 1.24 billion Br, signs of tougher competition in Sharia-compliant banking. Fees and commissions fell by 8.2pc to 1.78 billion Br, while foreign exchange gains dropped 21.2pc to 1.49 billion Br. (258.35 million dollars), revealing broad strains on export receipts and remittances that have strained every bank’s foreign currency business.

Private lenders see parallel headwinds, but Coop Bank’s reliance on a smaller slice of forex operations reinforces the need to diversify revenue sources or enhance trade finance. Yet, foreign exchange losses dropped by 35.2pc to 1.27 billion Br, softening the impact of reduced income.

According to Coop Bank's President, Deribie Asfaw, despite multiple setbacks, it was a relief not to suffer losses in a period when costs soared and some revenue streams faltered.

“It’s good that we haven’t incurred a loss,” he told Fortune.

However, after tax, Coop Bank's profit sank by 38pc to 1.62 billion Br, cutting earnings per share (EPS) to 15 Br, down by half from the previous year. Analysts such as London-based Abdulmenan Mohammed (PhD) warned that the steady profit drop over several years should be taken seriously.

Close inspection shows interest on fixed-time deposits soared by 89.3pc to 1.87 billion Br, although these deposits increased by almost 20pc, a result of the Bank's higher rate offerings.

“The massive expansion of interest expense ought to have been due to increased rates offered to time deposits,” said Abdulmenan.

Net interest expenses account for 32.81pc of outlays, which is a slight cushion compared with the 41pc or more seen elsewhere. Still, Abdulmenan cautioned that if lending stagnates, that advantage could fade.

Provisions for loan impairments dropped 40pc to 582.84 million Br, though Deribie said the expense remains substantial. Total expenses jumped by 15.35pc to 16.52 billion Br, with interest costs alone surging by 34.9pc to 5.42 billion Br despite limited deposit growth.

Coop Bank’s fourth president since its incorporation in 2005, Deribie focused heavily on digital expansion as a new frontier for deposit mobilisation, convinced it would restore momentum. Indeed, Coop Bank’s digital transformation stood out, headlined by Coopay and Michu 2.0, which have expanded transaction volumes and polished its public image.

Deribie, who spent part of his career at the state-owned Commercial Bank of Ethiopia (CBE), rising to vice president before joining Coop Bank in 2016, believes Coop Bank made a concerted effort to enhance convenience by expanding both physical branches and digital touchpoints, culminating in 758 locations. The Bank boasts millions of Coopay-Ebirr users and agents who handled 489.5 million transactions worth 1.36 trillion Br over the year. It launched Dx Valley 2.0, an incubation centre designed to nurture startup ideas and develop advanced digital systems. It upgraded its Michu 2.0 digital lending platform, which disbursed 4.3 billion Br in loans to more than 112,000 accounts.

The focus on digital solutions positioned Coop Bank to benefit from an evolving payment culture, though it also exposed the Bank to cybersecurity threats that have grown system-wide. Management says it invests in security measures, mindful that criminal actors probe for loopholes in digital platforms.

Although competition in digital products is fierce, Deribie urged collaboration with other banks, believing they can share a larger pie together. He expects further growth from shifting to a paperless system incorporating online credit processing and automated back-office operations. According to Deribie, these changes have replaced inefficiencies with technology-driven progress.

“We’re on recovery,” he told Fortune.

Despite its technological ambitions, Coop Bank's total assets dipped by 0.5pc to 139.7 billion Br, an unusual move in the banking industry, known for continual expansion. Its paid-up capital rose by 11.6pc to 11.2 billion Br, not only raising its capital adequacy ratio from 12.5pc to 14.6pc. It also puts Coop Bank ahead of the average 9.25 billion Br capital among the country’s 32 banks.

Abinet Tarekegn is the general manager of the Oromia Agricultural Cooperative Federation, commanding a membership of over three million and with a large share in Coop Bank. He attributed trimmed dividends last year to liquidity constraints. Still, he believed the Bank’s technological focus could strengthen rural outreach. He remains optimistic that Coop Bank’s broadened digital offerings will boost confidence among grassroots communities.

“We’re hopeful,” he told Fortune.