Profit Edges up Slightly at Oromia Bank, While Earnings per Share Tank

Oromia International Bank (OIB), a decade-old firm, registered marginal profit growth in the past fiscal year, walking backward from the considerable growth it reported the preceding year.

The earnings per share (EPS) of the Bank also fell sharply by 151 Br to 374 Br. Huge capital injection is attributed to the fall in EPS.

In the last fiscal year, the Bank netted 752.4 million Br in profit, a four percent increase from the preceding year. This is despite the 145pc growth that was registered the prior year.

The Bank, which recently marked its decaversary, intended to register one billion Br in gross profit during the year, according to Teferi Mekonnen, acting president of the Bank after replacing Abie Sano, who left to lead Commercial Bank of Ethiopia (CBE).

It grossed a little over one billion Birr in profits before taxes, which is seven percent higher than the same period two years ago.

"I'm very proud to be part of this history-making moment," Abie remarked in his message to shareholders.

The smaller increase in profit after tax was mainly due to the growing total revenue, which was outpaced by the growth of total expenses.

Last year Oromia’s interest on loans, advances and investments in NBE bonds and income from interest-free financing soared by 46pc to 2.4 billion Br. Service charges and commissions increased by 29pc to 654.2 million Br, while gains on foreign exchange dealings sank by 22pc to 146.4 million Br.

The performance in foreign exchange dealings is disappointing, according to Abdulmenan Mohammed, a financial statement analyst with close to two decades of experience.

"The management should take measures to rectify it," Abdulmenan said.

The chronic foreign currency shortage is among the significant challenges the Bank faced in the past fiscal year, according to Gadissa Bultosa, board chairperson of the Bank.

"Forex crunch, stiff competition, limited basic infrastructure, as well as the sporadic public unrest were the major challenges the banking industry in general and our bank, in particular, had faced," wrote Gadissa in his message to the shareholders.

The export sector was not fond of the country’s major agricultural products, such as coffee, due to instability and a fall in commodity prices in the global market that worsened foreign currency earnings, according to Abie.

"This challenged our international trade and may cause significant credit default risk to the industry," said Abie.

Oromia also registered a massive expansion in expenses. Interest expense increased by 54pc to 836.8 million Br. Salaries and benefits went up by 28pc to 798.7 million Br, while general administration expenses increased by 31pc to 438.6 million Br.

Provision for impairment of loans, advances and other assets soared by 424pc to 155.8 million Br.