Oromia Bank has elected a new board chairperson following the resignation of Assefa Sime (MD), after serving the role for over a year, replaced by Tilahun Gemechu, a senior advisor in the business and research department of Silverland International Group. He took the mantra beginning last month.
The Bank’s Board has adopted a governance strategy that rotates the chairmanship every six months. According to people familiar with the Bank, this procedure allows different directors to apply their expertise and keeps leadership attuned to the fast-moving banking industry. Last year, board members unanimously approved this decision, which marks a sharp departure from traditional board practices, often keeping a single chairperson in place for much longer.
“Waiting until the chairperson’s term ends is not a good strategy anymore,” said Board Secretary Solomon Geda. "All board members will be allowed to lead before their term ends."
According to a current board director, the leadership rotation might revitalize the Bank, stating how each member’s expertise will be used.
“Everyone can have their turn now,” he said. “The Bank will now be everyone’s responsibility, and this will improve performance.”
However, he conceded that Assefa stayed on longer than planned, missing the initial six-month window the Board had envisioned.
Assefa’s only regret as he stepped aside from the chairmanship was the recent slump in the Bank’s profitability.
“We'd hoped to restore shareholders’ faith,” he said.
He attributed the decline in profit margins mainly to escalating operating costs. He urged the new focus to be on cost optimization and revenue generation, a direction he believes can help build momentum behind Oromia Bank’s financial performance in the year ahead.
While the plan might appear unusual, Solomon believes it will introduce greater accountability, as each member will soon have direct experience in the driver’s seat. The Board decided to implement the change immediately, electing Tilahun with a majority vote on January 20, 2025, and reporting to the National Bank of Ethiopia (NBE) shortly after.
Assefa served as chairperson from September 2023 to March 2024 and again from May 2024 to January 20, 2025. A medical doctor by training, he stayed with the Board, leading the credit risk committee, where he succeeded Million Bekele. In his earlier assignments, Assefa also served as a board member of the Ethiopian Public Health Association and a local NGO. He once led a department within the Oromia Regional Health Bureau.
Tilahun brings three decades of experience in the business sector. He studied political science and international relations at Addis Abeba University (AAU) and later earned a postgraduate degree in business administration from St. Mary University. He worked for several federal agencies, including National Tour Operations (NTO), the Ministry of Industry, and the Industrial Parks Development Corporation (IPDC).
“I plan to change things around for the Bank,” he told Fortune.
His priorities are to boost Oromia Bank’s performance, restore shareholders' confidence, and improve customer satisfaction.
Along with Tilahun, the Bank’s Board appointed Eshetu Zeleke (PhD) as deputy chairman, replacing Netsanet Workneh (PhD). Two board members, including former chairman Gemechu Waktola (PhD), resigned a few months ago, reducing the Board to 10. Two individuals are waiting for final approval from the NBE to join the Board.
These leadership reshuffles come during broader changes across the banking industry.
In June 2024, the NBE introduced five directives to shore up corporate governance and risk management within financial institutions. The revised rules require stricter checks on who is allowed to serve on the Board of Directors, including a mandate that a third of the directors be nominated and elected by “non-influential” shareholders. Regulators define that category as individuals who hold less than two percent of the subscribed capital.
As of June 2024, Oromia Bank had 15,658 shareholders, and its Board of directors now should convince them that it can manage these governance requirements and financial pressures.
Incorporated as a third-generation financial institution, Oromia Bank has yet to implement the requirement that one-third of its Board be composed of individuals without direct share ownership or operational ties to the Bank. It has experienced fluctuating performance, with moderate asset growth and deposit increases offset by a steep slide in profitability.
Last year, deposits climbed to 56.42 billion Br, a 3.97pc increase, but falling short of the industry’s 30pc average growth. Loans and advances grew by only 3.5pc, reaching 43.71 billion Br. While the Bank’s total assets increased by four percent to 68 billion Br, and its income grew by 15pc to 9.5 billion Br, its net profit declined by 46.7pc to 840 million Br. The resulting impact on shareholders was also felt in the earnings per share (EPS) drop, which dropped by 56pc to 142 Br.
The Bank’s branch expansion strategy proved expensive, with costs surpassing revenue gains. Although it opened 72 new branches to reach 575 by June 30, 2024, deposits per branch fell from 107.91 million Br to 98.12 million Br. Operational expenses and personnel costs jumped by 35pc, reaching 8.5 billion Br. Executives had hoped the new branches would attract a wave of depositors, but the influx fell short of expectations, putting added pressure on profitability.
The net profit margin on total assets halved to 1.24pc, displaying higher costs that cut into margins. Even so, the Bank increased its paid-up capital to 6.5 billion Br, a 21pc year-on-year (YoY) rise that strengthened its capital-to-asset ratio to 14.07pc. According to analysts, this could give the Bank a cushion as it may boost profits in the coming year.
Eshetu Fantaye, a veteran of the banking industry who now works as an independent consultant, finds the rotation “confusing and unprecedented” and likely to affect the Bank.
“Board directors are simply going after rotational benefits,” he said, stressing that a board chairperson remains in place unless discipline or incompetence issues arise.
He argued that the board chairperson's role is critical for guiding strategy and ensuring the Bank’s performance meets industry demands. He warned that constantly shuffling leadership could erode accountability and make it harder to follow through on long-term plans.
“It's important to know what happened during the leadership period,” he told Fortune. “It’s a wrong strategy. They should put a stop to it.”
Despite the reservations voiced by some, supporters within Oromia Bank see the rotation as an imaginative attempt to distribute responsibilities more evenly among directors. By putting each member in the hot seat of chairmanship, they believe the Bank can draw on a broader spectrum of insights and experiences. They also feel it guards against tunnel vision, where one leader’s perspective might dominate for too long.
However, they acknowledge the challenges in coordinating strategies when the top job changes hands twice a year, a rapid turnover that could make it difficult to sustain consistent policies.
PUBLISHED ON
[ VOL
, NO
]
Dec 22 , 2024 . By TIZITA SHEWAFERAW
Charged with transforming colossal state-owned enterprises into modern and competitiv...
Aug 18 , 2024 . By AKSAH ITALO
Although predictable Yonas Zerihun's job in the ride-hailing service is not immune to...
Jul 28 , 2024 . By TIZITA SHEWAFERAW
Unhabitual, perhaps too many, Samuel Gebreyohannes, 38, used to occasionally enjoy a couple of beers at breakfast. However, he recently swit...
Jul 13 , 2024 . By AKSAH ITALO
Investors who rely on tractors, trucks, and field vehicles for commuting, transporting commodities, and f...
Mar 9 , 2025
Five years ago, 11 non-governmental organisations (NGOs), together with 40 allies acr...
Mar 2 , 2025
The domestic economy has endured a punishing half-decade. A global pandemic throttled...
Feb 23 , 2025
Africa is a place where the frustrations of its elites run high due to what they feel...
Feb 16 , 2025
Madame Kristalina Georgieva, managing director of the International Monetary Fund (IM...
Loading your updates...