Siinqee Bank Accelerates Growth, Struggles to Convert Scale into Profit

May 11 , 2025. By TIZITA SHEWAFERAW ( Fortune Staff Writer )

Siinqee Bank has burst confidently from microfinance trenches into the competitive commercial banking industry, posting an impressive profit surge that outshone many peers. Its net profit jumped by 82.7pc during the financial year ending June 30, 2024, displaying a rapid growth trajectory that few of its generational counterparts could match.

Nevertheless, while its deposit base grew explosively, Siinqee Bank's lending operations faced substantial limitations, mainly due to the National Bank of Ethiopia’s (NBE) regulatory credit growth ceiling. This has turned what could have been an expansive lending opportunity into a delicate liquidity balancing act.

"We’re dominating interbank and open market operations now," said founding President Neway Megersa, pointing to how Siinqee has adapted creatively to these lending constraints.

The Bank is increasing its activities in the emerging money markets, turning policy-induced constraints into new revenue streams.

Deposits nearly doubled from the previous year, reaching a substantial 46.8 billion Br. This surpassed the 37.5 billion Br mobilised by Tsedey Bank, a direct competitor in the same generational bracket. Yet, Siinqee Bank’s loan portfolio did not keep pace with this deposit growth, increasing only by 12.3pc to 27.73 billion Br. By contrast, Tsedey’s loan book stood substantially higher at 43.1 billion Br.

Siinqee Bank allocated roughly 38pc of its new loans to agriculture, a performance that is in line with its original microfinance mission. According to its Board Chairperson, Tolessa Gedefa, this aligns with Siinqee’s broader mission of inclusive finance. Though Tsedey Bank reached over one million microfinance clients during the same year, Siinqee served a substantial 200,000 during the same year, demonstrating its continued commitment to smaller-scale financing.

Despite these challenges, Siinqee Bank experienced remarkable scale growth. Total assets increased by more than 72pc year-over-year (YoY), reaching 59.7 billion Br. The Bank's extensive network now includes 544 branches, second only to the Cooperative Bank of Oromia, and boasts 6.25 million depositors, making it increasingly important in the financial sector.

However, beneath these impressive headline numbers, the Bank’s conservative lending approach has stifled capital productivity. Its loan-to-deposit ratio fell sharply from 96.9pc to 55.1pc, well below industry averages of 70pc to 80pc. Industry analysts say this represents an underuse of available resources, potentially affecting long-term profitability.

Neway acknowledged these limitations but spoke of the strategic decision to shift towards bonds and treasury securities during lending restrictions.

Interest income rose sharply by 56.1pc, totalling 5.01 billion Br, reflecting a strategic shift toward treasury securities. Bond holdings increased from zero to 2.12 billion Br, and treasury bills climbed dramatically to 6.8 billion Br from 1.34 billion Br the previous year.

Siinqee Bank increased its cash and cash equivalents to 15.34 billion Br, representing nearly 26pc of its total assets, up from 20.7pc the previous year. While this buffer helped Neway and his team manage liquidity risks, analysts warn that the strategy might undermine profitability unless the Bank strategically deploys these funds.

However, profits benefited notably from its expanded scale. Gross profit rose to 677 million Br, up 85pc, while after-tax profits climbed to 520 million Br.

“It’s a windfall likely to please shareholders,” said Abdulmenan Mohammed (PhD), the London-based financial analyst.

Return on equity (RoE) improved to 7.75pc, and return on assets (RoA) reached 1.43pc, marking substantial growth from the previous year. However, these figures remain far behind those of industry leaders.

Siinqee Bank’s capital-heavy yet profit-light profile is evident. It recorded a net margin of 9.2pc and asset turnover of 9.4pc, coupled with a high equity multiplier of 6.65 times, resulting in a relatively modest return on equity of under six percent. According to industry analysts, this pointed to leverage, rather than operational efficiency, as primarily responsible for its improved profitability.

Siinqee Bank notably allocated considerable loans to major projects such as Belema Resort, Ovid Real Estate, Kegna Beverages, and Kegna Agricultural Machineries. However, the overall slow growth in loans pulled the crucial loan-to-deposit ratio, leading experts to state concerns of idle capital.

Operational efficiency remains another challenge. Personnel costs now account for 43.5pc of total expenses, with administrative overheads adding another 21.2pc. Together, these consume nearly two-thirds of the Bank's cost structure, which could pose vulnerabilities if revenue growth slows. Profit per employee stood modestly at over 53,000 Br, uncovering productivity issues despite a 21pc increase in staffing.

Abdulmenan raised particular concerns over rapidly rising wage costs and operating expenses.

Neway defended the rise in wages and benefit adjustments as necessary during Siinqee Bank’s critical transition period from microfinance to commercial banking. He remained optimistic that expenses would stabilise as the Bank matures.

Impairment losses on non-loan assets notably surged to 135.7 million Br from eight million Birr previously, although impairment losses on loans improved, dropping from 205.9 million Br to 135.1 million Br.

Analysts warn that the sharp rise in impairment losses on non-loan assets should signal deeper balance sheet vulnerabilities. Auditors have also raised concerns over asset quality, particularly citing unresolved IT migration balances totalling 1.56 billion Br within "Other Assets," now totalling 12.4 billion Br, a dramatic 550pc increase. This issue resulted in a qualified audit opinion, casting doubts over internal controls and risk oversight.

According to Neway, the difficulties of transitioning from microfinance include the Bank having cleared considerable "microfinance baggage" and structural deficiencies and writing off remaining problematic loans.

“It was not a green field,” Neway said, recalling the transition period from microfinance institutions.

He disclosed that the team has done commendable work in clearing out bad loans and structural deficiencies.

“It’s cleared up now,” he said.

Neway disclosed that the Bank’s sharp annual deposit growth, from five billion Birr to 23 billion Br and 46.8 billion Br since then, is evidence of strong forward momentum.

“We don’t even want to remember last year’s numbers,” said Neway confidently. “You should see what’s coming.”

Savings deposits rose notably, marking a 64pc increase to 25.63 billion Br, making up 54.7pc of total deposits. Demand deposits accounted for nearly all of the remainder, at 44.9pc, with fixed-time deposits marginal at 0.4pc. Siinqee’s international banking operations generated 49.85 million dollars in foreign currency, a 334pc increase from the prior year, though constrained by limited correspondent banking access and a stubborn parallel market.

Securing government accounts also provided Siinqee Bank with vital stability. Of the 49 institutions within Oromia Regional State, 11 transferred their accounts to the bank.

“We’ve crawled on our knees to get these accounts,” Neway told Fortune, hoping more state institutions would soon follow suit.

The Bank traces its origins to the mid-1990s, when it was incorporated as a savings and credit institution and evolved into Oromia Microfinance Institution. It became a fully fledged commercial bank in April 2022. The transition, spearheaded by Neway, previously a board chairman, was complex but rewarding.

“It's hard and messy," Neway recalled. "But, it's worth it.”

Neway, an economics graduate from Mekelle University with postgraduate degrees from Addis Abeba University, began his banking career at Nib Bank and later served at Oromia Bank, where he worked in strategic management and business development for eight years under Abie Sano, now president of Commercial Bank of Ethiopia (CBE). He also played an instrumental role in launching several regional enterprises under the "Oromo Economic Revolution."

According to Bogale Feleke, a board director, the difficulties faced during the transition were particularly in meeting regulatory standards and sourcing qualified personnel. He urged regulators to provide special consideration to newly transitioned banks.

Siinqee Bank’s paid-up capital rose modestly by 2.9pc to eight billion Birr, impressive given the regulatory requirement of five billion Birr by 2026, a goal many veteran banks still struggle to meet. Neway acknowledged that the current capital suffices operationally but might limit aggressive growth once regulatory constraints ease.

“I’ve explained it to shareholders,” he said, noting plans to raise subscribed capital in the coming year.

About 70pc of Siinqee Bank’s shares are held by public companies under the Oromia Regional State.

The Bank's asset growth remained robust, with total assets expanding by over 72pc to nearly 60 billion Br. Notable investments include renovating its headquarters on Tito Street and financing a 15-storey building near the Damu Hotel on Africa Avenue (Bole Road). Premium branches opened within the Oromia Regional Government compound, and new branches emerged across strategic locations such as the Sheger City Administration. Sub-branches were also launched in Sebeta, Holeta, Sululta, Lege Tafo, Sendafa, Dukem, and Asella.

The Bank’s branch network grew by 77 during the year, reaching 544. Its workforce increased by 21pc to 9,760 employees.

One of these staff members is Aschalew Tesfaye, manager of the Ali Birra Branch near the Sar Bet area. He and his team focused on customer service and deposit growth. Despite initial market penetration challenges, Aschalew credited digital banking solutions with easing transactions and appealing to younger, tech-savvy customers.

“Digital tools have helped ease transaction congestion and build customer loyalty, especially with younger, tech-savvy clients that expect real-time banking,” Aschalew told Fortune.

Siinqee Bank’s growing digital capabilities, including adopting Oracle FLEXCUBE core banking and integrating with mobile platforms like TeleBirr, demonstrated an investment in infrastructure. Mobile banking users more than doubled to nearly 282,000, and interest-free banking through Siinqee's IHSAN grew by over 100pc.

“We’re done with digital advancement," Neway stated confidently. "It doesn’t get better than this.”

Yet, digital growth alone does not guarantee profitability, particularly amid narrowing industry margins.

Siinqee Bank plans to establish an investment bank and enter the emerging capital market. However, its domestic focus limits its foreign currency base primarily to remittances, constraining income diversification. Its rapid deposit growth and grassroots base, particularly in the Oromia Regional State, present a robust foundation. However, maintaining this trajectory requires addressing lending diversification, balance sheet transparency, and enhancing operational efficiency. Without such strategic shifts, analysts warn, Siinqee Bank risks remaining a high-growth yet modestly profitable financial institution amid evolving regulatory pressures and growing industry competition.

PUBLISHED ON May 11,2025 [ VOL 26 , NO 1306]

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