Awash Bank Stakes Claim in Budding Capital Market with Investment Banking Arm

Jul 6 , 2025. By NAHOM AYELE ( FORTUNE STAFF WRITER )

Awash Bank has announced plans to establish a dedicated investment banking subsidiary with an initial capital outlay of 200 million Br. The move, touted by industry observers as a step signalling growing confidence in the nascent capital markets, positions the Bank as the third entrant into the emerging investment banking landscape, following Wegagen and the Commercial Bank of Ethiopia (CBE).

This comes on the heels of a record-breaking financial performance. Awash posted a gross profit before tax of 22 billion Br for the 2024/25 fiscal year, a staggering 113pc increase over the previous year. Total income rose by 77pc to 64 billion Br, and deposits reached 332 billion Br, 11.24pc of which from interest-free banking operations. The Bank also expanded its lending activities, disbursing 219 billion Br in loans, and deepened its footprint in the foreign exchange market, raising over two billion dollars, a 25pc annual increase.

Temesgen Busha, Awash Bank’s chief transformation officer, disclosed that the Bank is finalising its commercial registration and the requisite filings with the Ethiopian Capital Market Authority (ECMA). The new share company will include Awash Bank, Awash Insurance, Odda Share Company, and two undisclosed individual investors.

The ECMA’s recent regulatory directives have set the stage for such developments, defining clear thresholds for market entry, including capital adequacy, internal controls, audited statements, and no-objection letters from the National Bank of Ethiopia (NBE). The licensing regime is also supplemented by pre-certification inspections, with emphasis on risk frameworks, governance, and operational readiness. Firms should also furnish fidelity guarantees worth 20pc of their shareholder equity.

Wegagen Capital Investment Bank S.C., the first licensed under the new regime, was established with 358 million Br in capital, 75pc held by Wegagen Bank, with Africa Insurance and other investors holding the rest. It was followed by CBE Capital Investment Bank S.C., a joint venture between the state-owned CBE and Dalol Capital, the latter led by investment veteran Zemedeneh Negatu and holding a 30pc stake.

Awash Bank’s strategic entry signalled a shift away from conventional and mainly interest-driven banking. Its new arm is expected to offer brokerage, advisory, and underwriting services, diversifying revenue streams and capturing value from fee-based income, a largely untapped source in the domestic financial sector.

“This isn't merely a financial move," said Girum Amaha, an economist and market commentator. "It’s a structural repositioning.”

He argued that Awash Bank’s scale, client network, and capital base make it uniquely equipped to bridge retail and institutional capital markets.

With over 15 million customers and nearly 1,000 branches nationwide, Awash Bank’s reach provides a ready market for capital-market products. Its digital platform, “Le Hulu,” which facilitated nearly half a billion Birr in unsecured loans to over 300,000 clients, also positions it advantageously to integrate technology with financial services.

Through its participation in the Inter-Bank Money Market, where it lent over 117 billion Br to peer banks last year, Awash is already embedded in the evolving financial infrastructure. The Bank’s latest foray could catalyse broader participation in capital markets, provided that institutional caution matches entrepreneurial ambition.

Girum also cautioned against a gold rush.

“Market depth is still shallow,” Girum warned, pointing to the risk of oversaturation. “Premature or uncoordinated entries could distort the market and sow instability.”

Girum identified a critical skills gap in the sector. While banks are familiar with credit risk and deposit mobilisation, few possess the expertise needed to navigate equity markets, structured finance, or corporate advisory. He urged financial institutions to invest in talent development, adding that without robust training, the promise of capital markets may devolve into mismanagement. Girum flagged regulatory compliance and governance as potential fault lines.

“There’s no room for moral hazard,” he asserted, warning against the import of speculative practices unsuited to Ethiopia’s economic conditions. “Proper product design and a strict separation between advisory and trading desks are essential to maintaining market integrity.”

Leverage, too, presents a double-edged sword. As subsidiaries of commercial banks, investment arms might wield considerable borrowing power. Without stringent oversight, this could result in risky margin trading practices with broader systemic implications. Girum stressed the need for strong internal risk checks and supervisory coordination.

PUBLISHED ON Jul 06,2025 [ VOL 26 , NO 1314]