“We plan to lower administrative costs,” he told Fortune.

Another notable item in Enat Bank’s ledger was the reduction of its loan impairment provisions by 41.3pc, down to 87.6 million Br. While this helped the Bank’s short-term earnings, observers cautioned that such a decline in reserves might leave Enat more vulnerable if the economy takes a turn for the worse or unforeseen credit defaults rise. Ermias disclosed that Enat Bank plans to reduce its non-performing loans (NPLs) in tandem with the lower provisioning level.

Ermias has been a president since December 2020 and brings extensive experience to Enat Bank. He holds academic credentials from Addis Abeba, Greenwich, and Key West universities, and was a deputy president in charge of corporate services since Enat’s founding 12 years ago. He spent 15 years in various roles at the Bank of Abyssinia (BoA). A third president since Enat Bank's incorporation, he sees digital banking as the future.

Under his stewardship, Enat Bank is integrating new technologies, forging partnerships in electronic payment gateways, and introducing solutions such as the Maleifya Digital Lending Platform, M-Pesa integration, and Arif POS services. In the past year, it processed 1.2 million digital transactions, and Ermias believes this move to digital platforms will help Enat grow.

“Everyone is a rookie in the digital realm, which levels the playing field for us,” he told Fortune.

One staff member, a branch manager turned operations officer, has witnessed Enat Bank’s move toward digitisation firsthand. Muleta Nigussie was transferred to the Netsanet Mengistu branch in Addis Abeba after managing a branch in Jimma. He sees the Bank’s pursuit of digital solutions as vital in an era when customers increasingly prefer to transact online.

“That’s the future of banking,” he said.

Enat’s board of directors, chaired by Aster Solomon, is looking toward several looming changes in the banking industry. The newly introduced floating exchange rate regime, the advent of a capital market, and the potential opening of the financial sector to foreign capital may ignite competition and innovation. However, Aster sees them as catalysts for growth. She believes these developments will support Enat Bank’s expansion, improve liquidity conditions, and help it achieve objectives like erecting a new headquarters.

Incorporated over a decade ago with 135.5 million Br in equity raised from around 8,000 shareholders, Enat Bank has carved out a mission to empower women entrepreneurs through targeted products and services. Launched by 11 women promoters, including Meaza Ashenafi, the former Supreme Court President, the Bank stands out for its focus on women financial inclusion.

“It’s our unique value,” said Ermias, arguing that this characteristic sets the Bank apart.

Enat Bank’s paid-up capital grew to three billion Birr, a growth of 18.1pc, lower almost by half of the industry's average. However, it needs an additional two billion Br to meet the regulatory minimum requirement of five billion Br by 2026.

“We’ll be focusing on capital expansion,” Ermias told Fortune. “It’s what keeps us up at night. But, we are hopeful.”

Nonetheless, Enat Bank's capital adequacy ratio (CAR) was a comfortable 21.18pc, well above the threshold set by regulators, signalling that it has sufficient loss-absorbing capacity if loan defaults rise unexpectedly. It retains adequate liquidity, with cash and bank balances making up 24.6pc of deposits, providing a crucial safety net should economic conditions deteriorate and depositors suddenly need their funds. But, Enat Bank is heavily reliant on deposits for over 90pc of its liabilities, which could become a vulnerability if market dynamics shift and deposit competition intensifies.

However, the Bank remains well-capitalised overall, with a total equity of 4.21 billion Br — up by 17.7pc — and a capital-to-asset ratio of 15.5pc.

Although it remains smaller than some of its peers, Enat Bank has a loyal customer base that believes in gender empowerment. It has partnered with international organisations such as the MasterCard Foundation to fortify its resources and widen its outreach to women.

However, founding shareholder Yohannes Meshesha sees further room for growth, particularly in the area of expanding services to women-owned businesses. Also a shareholder at Hibret Bank and acknowledged Enat Bank’s relatively modest size, Yohannes is convinced the Bank’s distinct social role will keep attracting customers. He conceded that the economic climate may be bumpy, with regulatory policies restricting lending and financial institutions competing for a limited pool of deposits. He is also convinced that Enat Bank’s management can seize opportunities if they refine their cost controls and customer acquisition strategies.

“They've to buckle up,” he told Fortune.

The Bank’s efficiency metrics painted a mixed picture. Its asset turnover rate, measuring how effectively the bank generates revenue from its assets, improved to 15.77pc from 14.61pc. But, return on equity (RoE) inched down to 13.18pc from 13.25pc, and return on assets (RoA) stayed around 2.04pc. The equity multiplier, a gauge of leverage, rose to 6.46 from 6.38, revealing the Bank is leaning a bit more toward external funding sources. Loans and advances comprised 62.7pc of total assets, leaving the door open for more proactive lending if conditions become favourable.

Enat Bank’s income composition relied heavily on net interest income, which accounted for 27.1pc of total revenue, a steady performance compared to the previous year, with interest expenses comprising 51.4pc of total costs. This ratio uncovers the ongoing struggle in the banking industry to manage costs associated with higher deposit rates amid tightening monetary policies. The Bank’s loan-loss provisioning dropped to 0.46pc of total loans from 0.94pc the year before, either representing an improved loan portfolio or a more aggressive posture with reduced safeguards for potential defaults.

PUBLISHED ON Feb 16, 2025 [ VOL 25 , NO 1294]

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