Radar | Feb 26,2022
Debub Global Bank, one of the youngest in the industry, has registered a 39pc growth in profit during the past fiscal year. Its profit growth was well above the 2019 industry average of 32pc.
The net profit of the Bank grew to 292 million Br, leading its earnings per share (EPS) to expand by 7.4pc to 347 Br. During the past fiscal year, the EPS of many financial institutions has dropped.
This is a remarkable performance, according to Abdulmenan Mohammed, a financial statement analyst based in London.
"The shareholders should be delighted about earning above the industry average," he said.
Asebe Melaku, who joined the Bank as a founding shareholder after a tip-off from a friend, is well satisfied with its performance in the past fiscal year. He joined Debub Global eight years back with 10,000 Br worth of shares, and the value of his shares has now reached over 300,000 Br after additional investments.
Yet Asebe says that the Bank needs to work hard as it will face stiff competition in the coming years.
“More new banks are joining the sector,” he said. “There are even banks with under formation status that have a paid-up capital higher than Debub Global.”
Over the past year and a half, over a dozen banks have started the formation process and one of them, ZamZam, has secured an operational license. Goh, Hijira and Ahadu banks are among those that have already held establishment general assemblies.
In contrast to the exciting news for Debub Global shareholders, the central bank suspended the dividend payments until some outstanding issues related to letters of credit (LC) the Bank has previously approved are cleared up. Currently, the Bank and the external auditor are working on the issue, according to Tesfaye Boru (PhD), president of the Bank.
"The process won't bring a major change on the balance sheet," he said. "And I hope it'll be cleared up very soon."
Debub Global's balance sheet has expanded significantly. Its interest on loans, advances and NBE bills soared by 62.2pc to 521.7 million Br. Its income from foreign exchange dealings showed a significant spike of 178pc to 213 million Br. Service charges and commissions increased by 23.3pc to 275.8 million Br, while other operating income reached 241 million Br, registering a 119.4pc growth.
Nuredin Awol, the Bank's board chairperson, attributed the renewed commitment, organised resources, and strategy for the positive financial and operational performances.
"Our elevated commitment to broaden customer service and improve service quality has led us to engage in aggressive branch expansion, diversifying banking channels, broadening product assortment and adopting modern IT," Nuredin remarked.
Achieving a significant increase in foreign exchange income while other banks witnessed a significant drop in this business area is an impressive feat, according to Abdulmenan, who says that the management should take credit.
Tesfaye, the president, attributes the achievement of a better foreign currency earnings performance to working with top exporters, mainly with coffee traders.
"We could've achieved more if the pandemic didn't break out, and we worked with NGOs and individuals' remittances," said Tesfaye, who says that the Bank does not have direct access to major international banks yet.
The increase in revenues was followed by a huge expansion in expenses. Interest on savings increased by 71.7pc to 247.4 million Br, while salaries and benefits paid by Debub Global soared by 79pc to 225.2 million Br. Expenses on general administration went up by 69.4pc to 190.4 million Br.
The expansion of expenses should alarm the management, according to the expert.
Tesfaye says that the company has strategically invested in branch expansion and staff recruitment to mobilise resources and reach many customers.
"And it yielded positively," he said. "Our income; loans and advances; and deposits expanded massively."
Debub Global disbursed loans and advances of 2.1 billion Br, an increase of 83pc. It mobilised deposits of 1.8 billion Br, an increase of 50pc. The loan-to-deposit ratio at Debub Global grew to 85pc from 64.3pc.
"This is a very significant increase," said Abdulmenan. "Even though the increase is good to earn more income, such a level of loans to deposits could cause a serious liquidity problem."
The figure demonstrates tight liquidity due to the cash crisis that occurred across the banking industry in the last fiscal year, according to Tesfaye.
Last year saw a severe liquidity crunch, which left most banks strapped for cash. This led the central bank to intervene and offer 14.5 billion Br in loans to the banks at a competitive bidding interest rate.
The total assets of Debub Global expanded significantly, achieving a 42pc rise to 7.8 billion Br. The Bank's investment in NBE bonds slightly decreased by 0.6pc to 1.1 billion Br. The bond investment accounts for 14pc of its total assets and 20.6pc of total deposits.
Liquidity ratios indicate that Debub Global’s liquidity level slightly increased in value terms but dropped in relative terms. Cash and bank balances increased by a modest rate of 1.1pc to 1.6 billion Br. The ratio of cash and bank balances to total assets fell by eight percentage points to 20.5pc.
This must have been due to a significant increase in loan disbursements, according to the expert.
Debub Global increased its paid-up capital by 36.6pc to 986 million Br. The Bank had capital and non-distributable reserves, including revaluation reserves, of 1.2 billion Br and a capital adequacy ratio (CAR) of 26.9pc.
This indicates that Debub has strong capital, according to Abdulmenan.
PUBLISHED ON Jan 09,2021 [ VOL 21 , NO 1080]
Radar | Feb 26,2022
Fortune News | Jan 25,2020
Commentaries | Jun 18,2022
Radar | Apr 03,2021
Editorial | Jun 18,2022
Fortune News | Mar 09,2019
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Fortune News | Mar 21,2020
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