At Enat Bank, Fast Growth Meets a Harder Reckoning

Apr 5 , 2026. By BEZAWIT HULUAGER ( FORTUNE STAFF WRITER )

Enat Bank’s latest financial results show a dual narrative of strong expansion and rising structural pressure. The women-led Bank is piling up deposits, branches and purpose at speed, but thinner margins, swelling costs and weaker cash generation raised questions about whether growth can deliver for shareholders.

Yifru Tesfaye watched a small team move a heavy flow of money through Enat Bank’s branch near Piassa, where 10 employees serve around 50 customers a day and have already exceeded their deposit target by nearly threefold.

The Branch, which includes a library and serves retail customers and small corporate clients, has nearly doubled planned targets and is still pushing for more deposits, according to Yifru, who spent nearly two decades at Abyssinia and Goh Betoch banks. The scene offers a fitting entry point into Enat Bank’s last financial year. Enat Bank was busy, ambitious and socially distinctive, but it was still under pressure to prove that its expansion could translate into stronger returns for shareholders.

It was expanding and promising, but deposits were rising faster than loans as pressure on returns mounted.

Gross profit more than tripled over five years, though unevenly. Credit risk remained manageable, though concentrated. Liquidity risk was present, but contained by a deposit-led funding model and a healthy capital cushion. The watchpoints were high funding costs, large sector exposures in loans, a maturity mismatch between short-term liabilities and current liquid assets, and the absence of short-dated backup funding lines.

Net profit reached 706.3 million Br on total assets of 36.36 billion Br, and gross profit jumped by 17pc to 835.6 million Br. Profit per employee had a heavy cost structure, which diluted the benefits of rapid growth.

Total assets climbed by 33.6pc from 27.22 billion Br, while equity increased by 29pc to 5.44 billion Br. Deposits surged to 28 billion Br, the strongest growth in the Bank’s history, with a 34.6pc jump, while gross loans increased by 19.8pc to 20.80 billion Br.

According to Mekbib Tesfaye, a London-based analyst, these look “structurally embedded rather than transitional,” undermining efficiency and profitability. Margin compression, driven by dependence on high-cost deposits, posed a “strategic vulnerability” and could limit future earnings unless funding costs are brought under control.

Mekbib's warning extended beyond the income statement. He cautioned “a significant divergence between accounting earnings and cash generation,” arguing that dividend capacity and sustainability may come under pressure.

Margin compression, rising costs and earnings volatility were already visible.

"The past year may mark a turning point when incremental growth delivers diminishing returns to shareholders,” said Mekbib.

The Bank's executives challenged this interpretation. Its President, Ermiyas Andarge (PhD), argued that slower profitability growth reflects a deliberate investment phase rather than a structural failure. He believes that expansion in branches, infrastructure and digital services is necessary to secure long-term viability. Enat Bank is accelerating digitalisation even as it continues to add physical outlets.

“There are works that can't be done with digital branches," Ermiyas told Fortune. "We need an optimal number of branches.”

Enat Bank opened 120 branches in the past few years, compared to 50 in its first nine years. The expansion helped fuel deposit growth, but not without revealing efficiency gaps. With total deposits spread across 212 branches, the Bank averaged 133.3 million Br per branch, below the 150.05 million Br average for 11 similarly sized banks.

However, Enat Bank remained committed to women’s economic empowerment while pressing ahead with the rapid expansion of its branches and digital services. Nearly 61pc of the Bank is owned by women, and women hold 64pc of its board seats. It has trained 12,000 women, set up a risk-sharing mechanism funded by Gebeta, and recorded a 100pc increase in the number of women receiving uncollateralised, women-focused loans.

For Ermiyas, the focus on women is not only branding but a working business model.

“It's also like serving our purpose with limited resources,” he told Fortune.

Earnings per share increased by 10pc to 221 Br, though the increase was partly diluted by a larger capital base after expansion. Paid-up capital reached 3.81 billion Br during the year and has since climbed to nearly six billion Birr, enough to clear the National Bank of Ethiopia’s (NBE) minimum capital requirement of five billion Birr.

However, the Bank’s risk-weighted capital adequacy ratio slipped to 13pc from 14pc, but stayed comfortably above the regulatory floor of eight percent. With equity of 5.44 billion Br and profit before tax of 835.6 million Br, Enat Bank still held a solid cushion against risk. Still, the Bank’s performance looked less striking when set beside the broader industry.

Commercial bank assets across the industry expanded by 44.5pc to 4.74 trillion Br, while deposits grew to 3.51 trillion Br, representing 40.7pc jump. Liquid assets nearly doubled to 1.07 trillion Br, while net income after tax for the industry surged by 61.3pc to 93.4 billion Br.

A weighted average of 11 banks in Enat Bank's peer group showed deposit growth of 33.4pc and loan expansion of 17.4pc, producing a combined loan-to-deposit ratio of 73.4pc. The average capital-to-asset ratio of 12.8pc, equivalent to an asset-to-equity multiple of 7.8 times. Weighted average return on assets was 2.1pc. Interest expense absorbed about 34pc of total expenses, while personnel and administrative costs accounted for nearly 69pc among banks with sufficient disclosure.

Against that backdrop, Enat Bank sat near the middle of the pack.

Its return on assets was 1.94pc, slightly below the weighted-average 2.10pc. Its leverage, measured at 6.68 times equity, was lower than the average of 7.8 times, suggesting a more conservative balance sheet. Its capital-to-asset ratio of 14.98pc was stronger than the industry average of 12.8pc.

On lending, Enat remained close to the market norm. Its loan-to-asset ratio of 57.2pc was below the 59.62pc average, while its loan-to-deposit ratio of 73.6pc was close to the 73.48pc average. Growth was somewhat better. Deposits rose 34.6pc, ahead of the 33.49pc average, and loans grew 19.8pc, above the 17.40pc benchmark.

The Bank also generated more profit per employee than many of its peers. At 341,704 Br, profit per employee was higher than the average of 310,655 Br. But deposits per branch, at 133.3 million Br, trailed the average, pointing to weaker branch-level mobilisation.

That mixed picture leaves Enat Bank in a difficult but not unusual position. It is growing, well-capitalised and distinct in its market identity. But it is also facing pressure from thinner margins, high funding costs, heavy operating expenses, weaker cash generation and concentrated exposures.

The challenge for management is no longer just expansion. It is turning that expansion into stronger returns. Unless the Bank can lower funding costs, protect its margins, rein in expenses and convert growth into better shareholder value, its progress will remain incomplete. Its branch near Piassa captures that story well: active, ambitious and full of promise, but still under pressure to show that growth can deliver.

Even so, expansion did not produce cleaner returns.

The Bank paid 309.6 million Br in dividends, down from 361.9 million Br, as the payout ratio fell to 44pc from 65pc. Return on equity (RoE) was at 13pc, far below the wider industry benchmark of 32pc.

Its asset-to-equity ratio was 6.68 times, while its capital-to-asset ratio was 14.98pc, a solid cushion. The strain appeared elsewhere, in the squeeze between earnings, funding costs and operating costs. Total revenue reached 5.67 billion Br, while gross interest income contributed 3.88 billion Br (69pc) of total revenue. Net interest income was reported at 1.13 billion Br, representing 19.9pc of total income, but registering a 2.9pc year-on-year decrease.

According to analysts, the compression appears to have come from interest expense rising faster than interest income, which grew strongly, but funding costs expanded faster. Net interest expense jumped from 656 million Br to 2.76 billion Br, including a 50pc increase between the last two reporting years. That compressed the net interest margin to 29pc from 39pc.

While total expenses reached 4.83 billion Br, interest expense alone accounted for 2.76 billion Br (57.1pc) of those expenses. Personnel costs came to 1.25 billion Br (25.9pc), pushing the cost-to-income ratio to 72pc, well above the industry norm of 45pc to 60pc. Other administrative and operating expenses were 726.9 million Br (15pc).

The loan book itself remained manageable. The impairment allowance was 263.2 million Br against a gross loan portfolio of 20.80 billion Br, implying a provision ratio of 1.27pc. Stage 3 loans totalled 612.1 million Br, about 2.9pc of gross loans. The non-performing loan ratio (NPL) was reported at 2.6pc, with high-risk lending concentrated in domestic trade, services and construction. A broader stress reading showed a combined Stage 2 and Stage 3 share of about 7.8pc.

Export lending accounted for 4.50 billion Br and domestic trade and services for over four billion Birr, together representing roughly 41pc of gross lending. Add industry and transportation, and the top four sectors account for about 67pc of the portfolio.

Trade finance emerged as one of the clearest growth lines. Interest income from import and export financing jumped twentyfold to 704 million Br in 2025.

Foreign exchange gains jumped sixfold to 384.5 million Br, and service charges increased by 53pc to 579 million Br. Together they helped lift net operating income by 24pc to 2.93 billion Br. But even here, part of the gain came from foreign-exchange income, signalling that revenue growth was driven more by macroeconomic policy changes than by internal operating gains.

Enat Bank's leadership appeared to concede to these challenges. Aster Solomon, chairwoman of the Board, told shareholders that the year unfolded in "a difficult setting" shaped by inflation, supply disruptions, geopolitical tension and higher energy costs. She admitted that these forces deepened uncertainty, especially in emerging markets still dealing with the aftereffects of the pandemic. She referred to domestic instability as "man-made disruptions" that impacted supply chains and business activities, increasing pressure on households and firms.

The country's policy environment shifted sharply during the year, including monetary policy changes and the adoption of a floating exchange rate regime introduced in July 2024.

"The impact on the Bank was limited, close to no impact," the President said.

He attributed prompt repayment of obligations, such as Letters of Credit (LCs), to helping shield Enat Bank from the worst effects of the monetary policy shift.

Customer deposits revealed a deposit-funded balance sheet. Financial liabilities due within 30 days totalled 5.42 billion Br, while gross cash and balances with banks were 5.23 billion Br. On a broad view, near-cash almost covered short-term liabilities. On a stricter view, only 3.22 billion Br of those balances were current. The Bank also had 1.83 billion Br in undrawn borrowing facilities, though these were mostly beyond one year in maturity rather than short-term emergency lines.

Against this backdrop, Enat Bank’s liquidity posture became more conservative. Its loan-to-asset ratio was 57.2pc, while the loan-to-deposit ratio fell to 73.6pc from 81pc, revealing stronger deposit mobilisation and the effect of the Central Bank's cap on lending growth.

“We'll increase the deposit more for this year,” Ermiyas told Fortune.

PUBLISHED ON Apr 05,2026 [ VOL 27 , NO 1353]