Abay Bank Surges on Currency Gains, Rapid Growth

Jan 4 , 2026. By BEZAWIT HULUAGER ( FORTUNE STAFF WRITER )

Abay Bank’s financial year 2024/25 would be remembered as a landmark period of growth and strong returns. The Bank delivered record profits, maintained prudent liquidity, and rewarded its shareholders handsomely, mainly due to a favourable exchange rate regime and disciplined management. But as operational costs climb, credit concentrations persist, and foreign exchange gains prove less reliable, the true test for Abay Bank lies in sustaining this momentum under less accommodating conditions. Whether this performance represents a new foundation or a fleeting peak remains to be seen.

Abay Bank marked its 15th year in the banking industry with what analysts characterised as a breakout performance, setting new records in profitability, liquidity, and shareholder returns.

This noteworthy turnaround came after a year marred by margin compression and tepid profit growth, but it has also exposed new vulnerabilities that may test the Bank’s response in the face of future market shifts. However, its headline figures for the financial year 2024/25 tell a story of decisive recovery and expansion.

Abay Bank posted a gross profit of 4.2 billion Br, nearly doubling its result from the previous year. Total operating income expanded sharply by 58pc to reach 10.4 billion Br. Net profit, almost at three billion Birr, rebounded, and the bank’s earnings per share (EPS), a key metric for shareholders, shot up to 463 Br, a 65pc increase from the prior year, after previously falling by 22pc to 360 Br. Even after last year’s slide, the EPS stayed above the private bank average, but this year’s leap put Abay Bank back among the industry's top performers.

The year’s earnings represented nearly 46pc of par value, an unusually high return for a private bank. The Bank reported a return on assets of approximately 3.8pc, a figure well above the two to three percent range typical in the industry. Leverage, measured as assets to equity, was 7.48 times at year-end, producing a return on equity of about 27.9pc, driven by strong profit margins and a moderate equity multiplier.

Shiferaw Tesfaye is a public service veteran and one of the 4,500 founding shareholders of Abay Bank, incorporated in 2010 with a paid-up capital of 125.8 million Br. Pleased with the Bank's performance and growth over the years, he has never withdrawn dividends.

Central to the turnaround was a rapid expansion of the Bank’s scale. Its total assets climbed to 91.35 billion Br, up from 66.42 billion Br a year earlier, displaying year-on-year (YoY) growth of 37.5pc. Deposits also grew rapidly, rising by 36.7pc to reach 71.91 billion Br. Loan growth, while more restrained, remained strong, with net loans rising 19.8pc to 49.22 billion Br. These figures signal a period of vigorous growth for the mid-tier lender, even as it maintained a relatively conservative lending policy. The Bank’s loan-to-deposit ratio was 68.4pc, a mark of liquidity headroom and prudent funding rather than aggressive credit expansion.

Net interest income came in at 6.26 billion Br, representing nearly 60pc of total operating income and affirming Abay Bank’s status as a spread-driven commercial bank that relies on traditional intermediation. Yet non-interest income was a larger piece of the pie than for many peers. Net fees and commissions reached 1.99 billion Br, 19.1pc of operating income.

The foreign exchange windfall stood out as the most notable contributor.

A net forex valuation gain of 1.87 billion Br, arising from 5.18 billion Br in gains offset by 3.31 billion Br in losses, accounted for nearly 18pc of total operating income and roughly 44pc of profit before tax of Abay Bank. Removing the forex effect offers a different lens. Profit before tax falls from 4.22 billion Br to about 2.34 billion Br. The underlying business remains profitable, but the contrast revealed how exchange-rate movements heightened the year’s performance.

Sensitivity analysis showed that a 10pc move in the Birr value against a basket of major currencies would swing profit before tax by about 529 million Br, a grim reminder of the impact of exchange rate volatility on the Bank’s bottom line. Echoing a broader shareholders' anxiety, Shiferaw warned that the year’s performance, buoyed by a favourable foreign currency regime, may not be easily repeated.

“They should work harder now,” he told Fortune.

Although acknowledging that some gains were due to "favourable macroeconomic conditions" and forex revaluation, the Bank's management insisted that profit growth also reflected operational efficiency and strategic sectoral diversification.

Financial analyst Aminu Nuru, based in Doha, Qatar, characterised Abay Bank’s performance as “a strong balance sheet expansion and robust liquidity generation, underpinned by sharp increases in operating income and foreign exchange gains.” Yet he cautioned that “earnings quality and sustainability would require close attention,” noting that a large share of net income was derived from potentially non-recurring foreign exchange gains.

The adoption of a market-driven exchange rate regime in August 2024 played a major role in the year’s stellar results. The Bank recorded foreign exchange gains that had an outsized impact on its profit, a common feature of several banks in its category, such as Addis Bank.

Abay Bank stood out for profitability and liquidity, while landing closer to the middle of the pack on asset quality and cost efficiency. Its 28pc return on equity beat the industry average, and the conservative loan-to-deposit ratio contrasted with competitors running at or above 80pc. The Bank ranked in the top 20pc of the 32 banks, trailing only behind Nib Bank, while outperforming Hibret Bank over the past year.

Asset growth at 37pc outpaced Nib (1.3pc) and Hibret (17.9pc) banks, while liability growth of 38.6pc also led, with Nib’s liabilities up by 3.6pc and Hibret’s 32.3pc. Paid-up capital at both Abay and Hibret grew 16pc, with Hibret Bank reaching 8.1 billion Br.

“Rising operating expenses and impairment charges weighed on cost efficiency and asset quality,” said Aminu.

The Bank's branch-intensive business model comes with high overhead. Interest expenses reached 2.52 billion Br, accounting for 28.6pc of total expenses, at a little over six billion Birr. Personnel costs were even higher at 3.2 billion Br, with other operating expenses adding 2.13 billion Br. Including depreciation, lease interest, and impairment expenses, staff and overhead accounted for about 60.4pc of all expenses, a heavy burden for a bank still reliant on its physical network.

The Bank’s profitability remained sensitive to wage increases, rising administrative costs, and the efficiency of each branch in generating income.

Nonetheless, expense growth was not unique to Abay Bank. It was an industry-wide trend. Abay’s expenses climbed by 40pc to 8.8 billion Br, while Hibret Bank’s jumped by 57.6pc to 16 billion Br, and Nib Bank’s increased by 47.6pc to 14.1 billion Br over the year.

Yet, despite its heavy cost base, Abay Bank delivered solid productivity metrics. Profit after tax per employee was about 645,000 Br, and deposits per branch averaged 131.7 million Br, signs that the Bank was extracting value from its physical network comprising 4,651 employees and 546 branches, serving a customer base of 3.6 million depositors across the country.

Belayneh Yersaw, a manager at the Mexico Branch, described the year as "tumultuous," recalling how his branch faced customer relocations due to the city's corridor development projects and substantial withdrawals when a major macroeconomic reform was announced, with clients seeking to convert deposits into tangible assets. Export-related foreign currency deposits also declined, prompting a shift toward remittance income.

However, the branch took advantage of a national ID registration drive, which brought in new customers. As the branch pursued digital goals, local shops have adopted POS and QR code technology, fueling optimism for the future.

"We're working to change the performance of the branch this year," Belayneh told Fortune.

Liquidity remains a clear strength. Cash and bank balances more than doubled to 25.54 billion Br, making up about 28pc of total assets and 35pc of customer deposits. Net liquid assets to net current liabilities were at 38.1pc at year-end, compared to an average of 30.8pc during the year. Abay Bank entered the new year with substantial liquidity buffers to guard against funding stress or regulatory tightening.

The liquidity buffer, which covered cash for working capital, regulatory reserve requirements, and foreign currency deposits with overseas banks, ensured regulatory compliance, supported trade finance, and provided flexibility amid macroeconomic uncertainty.

While broadly contained, credit risk posed challenges. Loan impairment charges reached 138.97 million Br, 0.28pc of gross loans. Year-end credit loss allowances were 694.87 million Br, and credit-impaired loans totalled 1.51 billion Br, about three percent of gross loans, middle of the pack for the industry. Coverage for these exposures by loss allowances was moderate, at 46pc. Stage two loans, revealing increased credit risk, amounted to 3.51 billion Br, around seven percent of gross loans and nearly double the previous year’s figure.

Abay Bank's President, Yehuala Gessesse, attributed the rise in Stage 2 loans to “temporary and transaction-related repayment delays,” voicing confidence that they would not materially increase non-performing loans (NPL), given the Bank’s active monitoring and a generally improving economic outlook. Its total loss allowance on loans was 694.9 million Br, about 46pc of Stage 3 exposures and less than 1.5pc of the total portfolio.

Sectoral concentration remained pronounced, with nearly 36pc of the loan book dedicated to export-import financing (18 billion Br). Another large portion was allocated to construction (nine billion Birr),  sectors vulnerable to foreign exchange shortages and policy shocks. Yehuala insisted that risk appetite limits are set and regularly reviewed across all sectors and that the Bank’s credit risk system actively enforces these limits to keep exposures within defined tolerances.

Total capital was 10.2 billion Br against risk-weighted assets of 67.3 billion Br, giving a total capital ratio of 15.1pc, well above the eight percent regulatory minimum. Equity reached 12.21 billion Br, representing about 13.4pc of assets. However, leverage at 7.48 times put Abay Bank below the median among private banks.

By June 30, 2025, its paid-up capital had reached seven billion Birr, and the capital adequacy ratio was 15.11pc; by December 31, paid-up capital had increased to 9.7 billion Br. Yehuala plans to continue expanding capital through equity injections and retained earnings.

The year was also notable for Abay’s investment in digital infrastructure. The Bank achieved Payment Card Industry Data Security Standard (PCI-DSS) certification for payment security, and IT investments boosted digital transaction processing to 69pc, with new cheque clearing and security software enabling real-time payments. Yehuala claims to monitor cyber and operational risks daily through penetration testing, scenario analysis, and regular staff training, as well as real-time fraud detection. Still, digital fraud in the finance sector only losses exceeded 1.3 billion Br, up by 300 million Br from the previous year.

PUBLISHED ON Jan 04,2026 [ VOL 26 , NO 1340]