Abyssinia Bank Flexes Muscle Fighting for a Seat at the Top

Dec 13 , 2025. By NAHOM AYELE ( FORTUNE STAFF WRITER )

The Bank of Abyssinia (BoA) has crossed a crucial performance threshold for the 2024/25 financial year. Its balance sheet expanded sharply, deposits climbed despite tight monetary conditions, and lending activity pushed higher, cementing the Bank’s position among the systemically critical private lenders.

Its scale of expansion and the profitability that came with it placed Abyssinia Bank firmly beyond the ranks of mid-tier financial institutions, even as it remained short of the dominance enjoyed by the country’s largest private lender, Awash Bank.

However, its headline figures were flattering in its transitional status from being too large to be considered mid-tier, but it faced competition from both dominant incumbents and nimble, high-return rivals, such as Zemen Bank. Zemen operated a much smaller balance sheet but generated outsized returns, posting gross profit of over eight billion Birr on assets below 90 billion Br. Dashen Bank’s latest reported figures placed it closer to Abyssinia Bank in profitability, though on a smaller asset base.

Abyssinia Bank's return on equity (RoE) reached about 28pc, a level that would satisfy even demanding shareholders, while earnings per share (EPS) climbed to 50 pc from 33 pc a year earlier. This represented a 17-percentage-point increase, broadly consistent with the Bank’s 91.4pc year-on-year (YoY) growth in gross profit, which nearly doubled to 10.1 billion Br. Net profit (7.3 billion Br) grew by close to three-quarters compared with the previous year. However, its equity of 28.84 billion Br was lower than Awash Bank’s 37.95 billion Br but higher than Dashen Bank’s 23.9 billion Br.

Abdulmenan Mohammed (PhD), a financial analyst based in London and a keen observer of the domestic financial sector, called the performance “very impressive” and that BoA's management deserved credit for delivering such results under difficult operating conditions. He attributed much of the increase in after-tax profit to strong growth in revenues from financial intermediation and non-financial activities, such as foreign-exchange dealings.

However, Abyssinia Bank executives soft-pedalled the idea that the surge was driven by a single windfall, arguing instead that gains were broad-based and mirrored sustained improvements across the Bank's operations.

“Growth isn’t only a reflection of one big item," Bekalu Zeleke, president of the Bank of Abyssinia, told Fortune. "It's a sum of various interrelated banking activities.”

Abdulmenan attributed the loss of 149.57 million Br from foreign-exchange dealings to reforms in the foreign-exchange regime. According to Bekalu, foreign-exchange income contributed little to revenue during the year, even though trade finance volumes and foreign-currency earnings grew sharply. Foreign-exchange earnings increased by 56pc to 663 million dollars, primarily driven by export facilitation and remittances.

"Under a fast-depreciating currency environment," Bekalu said, "banks needed to maintain sufficient liquidity to support foreign-exchange holding capacity, a requirement that could itself create liquidity stress."

According to Bekalu, foreign-exchange revenue was directly affected by exchange-rate fluctuations, complicating income generation under a more flexible exchange-rate regime.

Bekalu attributed the expansion in the customer base, the wider service outreach, and the growing digital footprint to balance-sheet growth and profitability. According to him, these factors reinforced one another, allowing the Bank to scale up even as regulatory constraints limited credit growth across the industry.

Behind the earnings growth was a sharp expansion in assets. Total assets increased by 28.76pc to 286.23 billion Br, an expansion Abdulmenan depicted as impressive, noting that it was driven by a substantial buildup of cash and bank balances as well as the extension of additional loans. Its asset base placed Abyssinia Bank in an increasingly prominent position relative to peers. Its total assets exceeded Awash Bank’s 282.41 billion Br for 2023/24 by 1.35pc, while Dashen Bank’s holdings of 183.7 billion Br were 55.9pc lower.

Total liabilities at Abyssinia Bank reached 257.39 billion Br, higher than Awash Bank’s 244.46 billion Br and Dashen Bank’s 159.7 billion Br.

Deposits climbed to 243.18 billion Br, a nearly 27pc increase that stood out given the Central Bank’s tight monetary policy. Savings deposits accounted for 65pc of the total, a structure the Bank viewed as stable and less concentrated than business deposits. According to Bekalu, the Bank’s savings base was well distributed across a broad range of retail customers and had remained resilient despite growing competition. He credited customer experience initiatives, attracting and retaining clients through value-added services.

Interest-free banking emerged as a growing pillar, with Abyssinia Ameen, its interest-free division, seeing deposits climb by 30.6pc to 31.5 billion Br, accounting for 13pc of total deposits. Bekalu attributed the division's success to a separate strategy and dedicated structures. Ameen operated on a Shariah-compliant core banking system, iMAL, certified by AAOIFI, which Bekalu described as the first of its kind in the domestic banking industry.

"Continued improvements in customer experience, sales and digital services would help keep Ameen competitive," he told Fortune.

Nevertheless, the structure of the balance sheet shifted in ways that improved liquidity but also raised questions about efficiency. Abdulmenan observed that while the Bank’s liquidity position looked comfortable, cash accumulation did little to generate income and urged that more funds could be deployed into loans if conditions allowed.

The loan-to-deposit ratio fell to 79.5pc from 85.1pc a year earlier, unveiling both deposit growth and the constraints imposed by the credit cap. Liquidity ratios improved sharply. Cash and bank balances expanded by 80pc to 50.29 billion Br, lifting the cash-to-total-assets ratio to 17.6pc, an increase of five percentage points.

Loans and advances reached 193.38 billion Br, up by 18pc, a pace broadly consistent with the revised credit growth ceiling imposed by the National Bank of Ethiopia (NBE).

The expansion was not without costs or risks. Provisions for loan impairments more than doubled, rising from 1.1 billion Br to 2.12 billion Br, a development Aminu Nuru, a financial analyst based in Doha, Qatar, saw as a sign of rising credit risk. Abdulmenan echoed his concern, pointing to the sharp increase in provisions for loan and other asset impairments, which grew by 155.2pc to 2.63 billion Br. The provisioning rate increased from roughly 0.7pc of gross loans to about 1.1pc, revealing a more cautious position toward credit quality.

Management attributed the higher provisions to prudence rather than deterioration, noting that the loan book was concentrated in economic sectors exposed to foreign-exchange shortages, security disruptions and policy uncertainty, including manufacturing, exports and domestic trade. Nearly 47pc of the loan portfolio was allocated to industry and export sectors. Bekalu argued that the Bank sought to manage sectoral concentration while supporting areas of national economic priority.

"It's a balance between prudential lending and the need to meet balance sheet growth targets," he said.

He believes the higher charges, while weighing on earnings, signalled an effort to recognise risks early rather than defer losses.

Yet, analysts cautioned that the pace of loan growth carried inherent vulnerabilities in an economy wrestling with inflation, currency depreciation and uneven growth. Despite these pressures, income growth was broad and strong.

Total income grew by 40.8c to 39.07 billion Br, while interest income remained the main driver, accounting for nearly 84pc of revenue. Net interest income, the spread between what the Bank earned on loans and investments and what it paid on deposits, reached 22.4 billion Br, about 57pc of total income. Interest on loans, advances and Central Bank bills increased by 33pc to 32.72 billion Br.

Non-interest income grew even faster. Service charges and commissions surged by 136.7pc to 4.97 billion Br, while other income increased by 72pc to 1.46 billion Br. Bekalu characterised this performance as remarkable, given the tight monetary policy environment and the slowdown in business activities. It is a view that Aminu echoed, noting the growth, with higher transaction volumes, increased use of digital channels, and broader customer engagement.

Expenses grew more slowly than income as total expenses increased by 28.9pc to 28.97 billion Br. Interest expenses accounted for 35.6pc of total costs, unveiling rapid deposit growth, while wages and benefits consumed 33.8pc. General and administrative expenses accounted for about 21.5pc, and salaries and benefits climbed modestly by 7.2pc to 9.78 billion Br, a level Abdulmenan saw as evidence of effective expense management.

General administrative expenses, however, jumped sharply by 44.8pc to 6.24 billion Br, driven mainly by a 1.58 billion Br increase in other operating costs. Despite this, the Bank’s cost-to-income ratio improved compared with the previous year. According to Bekalu, investments in digital infrastructure, including paperless branches, were expected to yield efficiency gains over time. As these services mature, he hopes, operating expenses should decline further while customer experience improves.

The analysts agree that the Bank of Abyssinia's balance sheet demonstrated an aggressive but not reckless intermediation strategy. Loans and advances accounted for roughly two-thirds of total assets, while the loan-to-deposit ratio remained below 80pc. These levels revealed that Abyssinia Bank was actively deploying funds rather than parking excess liquidity in low-yield instruments. Equity rose to 28.8 billion Br, providing a capital-to-assets ratio of about 10pc.

Bank of Abyssinia’s paid-up capital increased by 5.6pc to 15 billion Br, offering it a capital adequacy ratio (CAR) of 11pc, above the regulatory minimum, though both analysts agreed that further strengthening would provide a larger buffer against shocks. Its capital stood between the two peers, below Awash Bank’s 20.3 billion Br but above Dashen Bank’s 12 billion Br. Awash Bank remained the industry’s bellwether, with assets exceeding 440 billion Br and gross profit exceeding 22 billion Br, supported by a branch network approaching 1,000 outlets.

Abyssinia Bank employed 11,065 staff and operated a nationwide network of 928 branches. Outstanding deposits translated into a profit of 659,603 Br per employee, while deposits averaged around 262 million per branch, which stood out against system-wide benchmarks, 29pc higher than the industry average. It has built a relatively strong deposit base per outlet, outperforming the industry average on that measure, while its profit per employee reflected the trade-offs of scale, outreach and a mass-market banking model.

For Yohanes Mezgebu, customer experience manager at the Senga Tera Branch, the year was a success and rewarding for his branch and the Bank. He attributed the Branch's growth to its location in a busy construction materials market, its focus on individual and business clients, and its emphasis on customer care and service quality.

"There was still potential for even higher earnings," he told Fortune.

For many of Abyssnia Bank's more than 4,000 shareholders, some of whom met in September at the Adaw Memorial Museum, the story was largely positive. Earnings rose sharply, returns improved, and the Bank expanded. Liquidity was comfortable, and deposits continued to provide a cushion over loans. Profitability metrics were strong, supported by rising margins and a growing fee base.

Adana Berhe, a shareholder, described this performance as "outstanding" but saw room for improvement. He urged management to maintain momentum and keep pace with developments in the capital market, including the anticipated entry of foreign banks.

Bekalu disclosed that the Bank is comfortable with its capital position and moving ahead with a shareholder-approved capital injection. It is finalising the registration of shares with the Ethiopian Capital Market Authority (ECMA), a step that would sustain capital growth and compliance with revised capital rules issued by the Central Bank.

Another long-term shareholder, Gima Mekonnen, praised the strong earnings per share, calling it the highest since he became a shareholder, and voiced his optimism that management could uphold the trend.

PUBLISHED ON Dec 13,2025 [ VOL 26 , NO 1337]