Oromia Bank recorded strong performance from its operations last year, generating whispers of a rewarding year for its shareholders. Despite challenging economic conditions compounded by social unrest, political instability, and rising crude oil and base metal prices globally, it has seen robust growth in profit and earnings per share (EPS).

Oromia Bank’s net profit surged by 37.8pc to 1.2 billion Br, with EPS growing 37 Br to 307 Br.

This performance has placed Oromia Bank as a major player in the financial sector, ranking sixth of the eight most prominent private banks in total assets with a balance sheet of 114.6 billion Br. The Bank’s total revenue growth was attributed to growing interest on loans, advances, investments in central bank bonds, and incomes from interest-free financing, which raised by 18.8pc to 4.11 billion Br.

It has demonstrated net interest income and revenue growth in recent years. In 2021, its net interest income of 4.46 billion Br although lower than several other major banks, including the average for the eight largest banks. Oromia Bank’s revenue of 4.1 billion Br lower than the average for its peers by half.

Abdulmenan Mohammed, a financial statement analyst at London Portobello Ltd, commended the Bank’s performance. He noted that the Bank’s non-performing loans (NPL) ratio was at two percent, lower by two percentage points than the average for the top industry performers.

Teferi Mekonnen, president of Oromia Bank, attributed a robust management follow-up implemented after loan disbursements to lowering the NPL ratio.

However, experts recommend that the Bank strive to improve its financial performance and key metrics as the industry becomes increasingly competitive.

Teferi acknowledged the intense competition in the industry. Nonetheless, he emphasised that despite these challenges, the Bank’s foreign currency earnings and payment modalities remained strong, with most overseas suppliers and importers opting for Oromia Bank due to “its timely payment settlements.”

Oromia Bank’s net interest income is 73.3pc lower than Abyssinia Bank’s, showing the Bank must work to generate more interest income. Its return on equity (ROE) was 20pc, eight and nine percentage points lower than Abyssinia’s and Awash’s, respectively. However, at three percent, its return on assets (ROA) was higher than several other major banks in its category. Experts believe the loan and deposit growth is reasonable, especially with a loan-to-deposit ratio of 71.9pc, with a loan portfolio of 31.2 billion Br. Although lower other major banks, this was higher than what was held by Wegagen. While Oromia Bank’s net interest income is the sixth-highest in the industry, its net interest margin of six percent is lower than most other banks, suggesting intense competition for deposits and loans. The Bank mobilised a deposit of 43.4 billion Br last year, an increase of 26.6pc from the previous year.

“The liquidity level of Oromia seems good,” said Abdulmenan.