Gadaa Bank’s Sprint to Scale Leaves the Real Test Still to Come

Apr 10 , 2026. By NAHOM AYELE ( FORTUNE STAFF WRITER )

Compared with established players, Gadaa Bank’s asset growth of 82.5pc outpaced the peer average of 31.24pc. While it remains smaller than earlier generation banks such as Lion or Addis, Gadaa Bank stood out for its lower leverage and stronger capital buffers. The Bank’s cautious risk management resulted in a manageable impairment allowance of 0.96pc, even as borrowers faced increasing macroeconomic pressures.

Gadaa Bank’s latest year was impressive, but not yet the performance of a fully scaled earnings machine. It was the performance of a fast-growing, well-capitalised, highly liquid bank that built the balance sheet first and now faces the harder test of turning that expansion into durable profitability without sacrificing prudence.

In its second full year of operation, the third-generation Bank posted a strong profit, paid its first dividends, and expanded. The defining feature of the 2024/25 financial year was speed, and the question was how it grew.

Wolde Bulto, the founding president, called the year’s performance a “huge milestone.” According to him, the macroeconomic environment and regulatory policies constrained faster growth, but the Gadaa Bank delivered results across key indicators.

Total income reached 1.67 billion Br, up by 111.8pc from the previous year. Non-interest income was the main driver, accounting for 60.2pc of total income, while interest income contributed 39.8pc. Within non-interest income, the largest share came from other income, which reached 380.5 million Br, 22.8pc of total income. It was followed by revenues from the foreign exchange service of 314.9 million Br and guarantee commission income of 311.9 million Br.

Profit before tax surged to 444.8 million Br from 101.3 million Br, while net profit climbed to 342.8 million Br from 90.2 million Br. Earnings per share increased to 29pc from eight percent, allowing the Bank to distribute dividends to shareholders for the first time.

Abdulmenan Mohammed (PhD), a London-based financial analyst who has been keenly following the domestic financial sector for close to two decades, praised management for the year’s performance but argued that the profit growth was not recurring and urged shareholders to downsize expectations.

"Returns similar to the current year should not be expected going forward," said Abdulmenan.

The balance sheet explains why. Deposit mobilisation was among Gadaa Bank’s strongest performances. By year-end, total deposits had reached 7.1 billion Br, an increase of 76.81pc from the previous year. Assets grew to 10.14 billion Br from 5.56 billion Br, while equity increased to 1.78 billion Br from 1.20 billion Br. But assets and deposits expanded faster than loans. Loans and financing were about 3.7 billion, unveiling a loan-to-asset ratio of roughly 36.7pc and a loan-to-deposit ratio of roughly 53pc, excluding bonds.

Cash and balances with banks amounted to 2.08 billion Br, while the amortised cost of investment securities was 1.05 billion Br. Analysts see Gadaa Bank accumulating substantial liquid resources and remaining well-capitalised, but it did not deploy its funding base into higher-yielding assets as aggressively as its mature peers. According to Abdulmenan, the Bank was holding excess liquidity that should be allocated to income-generating assets to improve returns.

The President rejected that criticism, attributing the National Bank of Ethiopia’s (NBE) credit growth ceiling, introduced when teh Bank’s loan book was still lean.

"As a new entrant, the Bank couldn't fully deploy liquidity into loans," he told Fortune. "Management was redirecting funds into alternative channels, including the money market platform."

With macroeconomic conditions still volatile and off-balance-sheet guaranteed exposures and letters of credit approaching 2.97 billion Br, Wolde conceded that migrations of loans into Stage-2 and Stage-3 reflected broader pressures on borrowers. However, he argued that asset quality remained manageable.

The Board Chairperson, Hassen Hussien (PhD), echoed the President's line, crediting cautious risk management and calling the year crucial for "demonstrating resilience, management commitment, and shareholder trust."

Among more than 31,000 shareholders, Tilahun Chala, a founding and major shareholder, found the results exceeding his expectations, especially when some established banks had reported losses. He observed that some of the shareholders had feared a similar outcome.

"Even maintaining the current level of performance in the years ahead would still count as an achievement," he told Fortune.

However, Gadaa Bank’s position comes into sharper focus when set beside its peers, such as Lion and Addis banks. Lion remained much larger by almost every measure, with a broader branch network, a heavier staffing base and a far bigger balance sheet. Addis Bank also closed last year ahead in size and profitability.

Yet Gadaa stood out for caution. It operated with less leverage and held a stronger capital buffer relative to its assets. It also advanced a smaller share of what it had gathered from depositors, demonstrating a more conservative balance-sheet strategy. That made the Bank look more liquid, though also less aggressive in turning its resources into income. Lion, by contrast, appeared to push further into lending and generated more deposits through each branch, but its profit per employee lagged behind Gadaa Bank’s.

The disparity with Addis Bank was sharper still, with it showing stronger profitability and more efficient use of capital. Addis Bank had lower leverage, maintained a stronger capital base, and posted much stronger returns on assets and equity. It also reported a relatively modest level of non-performing loans, a sign of firmer asset quality.

Measured against 11 peer banks, Gadaa Bank delivered the kind of growth most competitors could not match, even if its branch network still showed signs of limitations. It outperformed the peer average in capital strength and profit per employee, at 310,655 Br, while its expansion was markedly faster across nearly every major line of business. Assets expanded by 82.5pc, deposits climbed by 76.8pc, and loans grew by 51.1pc, all comfortably ahead of the weighted averages of 31.24pc, 33.49pc and 17.40pc, respectively. Profit before tax surged 339pc, far outstripping the peer average of 55.38pc.

By the end of the year, the Bank operated 100 branches, employed 825 people, and served 575,977 customers. It opened 287,803 new accounts over the year. Management continued to push digital channels, including mobile banking, text and internet banking, but customer uptake was still modest, with only 114,695 users. That gap between rollout and monetisation surfaced at the branch level.

Tamiru Teshome, manager of a branch on Beyene Merid (Dejamach) St., near the Gotera Junction, hopes to see Gadaa Bank differentiate its services and innovate to remain competitive. Gadaa appears to be in build-out, not harvest mode. It is ahead on rollout but behind on monetisation, and its deposits per branch of 70.8 million Br were less than half the peer average.

Nonetheless, profitability, on the surface, looked impressive. Gadaa Bank’s net return on equity was about 19.3pc, built from a margin on revenue of about 20.5pc, asset turnover of 16.5pc, and an equity multiplier of 5.7 times. Gross return on assets was about 4.39pc and after-tax return on assets about 3.38pc. Yet analysts remain cautious about the quality of these earnings.

Total revenue was 1.67 billion Br, of which interest income was 666.3 million Br (39.8pc), while non-interest income was slightly above one billion Birr. The crucial line was the 340.9 million Br foreign-currency revaluation gain, equal to 20.4pc of total income. During the year, forex mobilisation increased by only six percent, reaching 41.82 million dollars. The profit jump was not driven mainly by recurring banking intermediation but was heavily assisted by exchange-rate-related revaluation.

A simple normalisation, stripping out the 340.9 million Br gain, would reduce gross profit from 444.8 million Br to roughly 103.9 million Br, nearly flat against the previous year’s 101.3 million Br. According to Abdulmenan, such income is largely one-off, raising questions about the recurrence of profit and EPS growth.

The President took the other side of the perspective. A former senior executive at the Oromia Bank and the Commercial Bank of Ethiopia (CBE), he argued that Gadaa Bank has not yet fully benefited from macroeconomic policy reforms and claimed that limited foreign exchange availability had deterred the Bank from optimising the opportunity, even though its forex assets had doubled as a result of the reforms.

Capital remains both a strength and a pressure point. The Bank’s capital adequacy ratio was 21pc, comfortably above the regulatory minimum of eight percent. But as the Central Bank pushes banks toward the Basel II and Basel III frameworks, higher capital levels will be required.

Gadaa Bank's paid-up capital increased by 21.3pc to 1.3 billion Br, but still below the National Bank's minimum threshold. Although older banks are required to meet the threshold by June 2026, Gadaa has until 2029. Even with that runway, Abdulmenan stated capital raising should be a priority, and shareholders such as Tilahun believe meeting regulatory capital requirements is a key concern.

"I'm confident that the Bank will get there ahead of the deadline," Wolde told Fortune.

The Bank’s listing on the Ethiopian Securities Exchange (ESX) in June 2025, which made it the second commercial bank to do so, "is central to that effort." Internal targets call for five billion Birr in capital by 2028 and seven billion Birr a year later.

Incorporated in 2022 with more than 28,000 founding shareholders and focused on underserved communities, Gadaa Bank was still in the build phase. Asset growth of 82.5pc outpaced Ahadu Bank’s 56.7pc in percentage terms, though Gadaa Bank’s total assets exceeded Ahadu Bank’s by only 0.5pc, while Amhara Bank remained far ahead at 43.28 billion Br.

"If macroeconomic pressures ease, the Bank aims to rank among the top 10 within a decade," he told Fortune.

However, the Bank’s community-banking identity sits somewhat uneasily with its loan mix. Export finance accounted for 29.4pc of loans, followed by domestic trade at 17.4pc, alongside substantial exposure to construction, imports, and diaspora and employee loans. Wolde acknowledged the gap, stating that community banking does not mean direct lending without preparation.

"The Bank is investing in financial literacy and entrepreneurship training, with lending expected to expand gradually, particularly to SMEs," he said.

On the asset quality front, the conventional gross loan portfolio totalled 3.69 billion Br, with an ending impairment allowance of 35.35 million Br and an annual impairment charge of 15.86 million Br. That placed the ending allowance at about 0.96pc of gross conventional loans and the annual impairment charge at about 0.43pc.

Other balance-sheet movements show the same unfinished quality. Other assets surged from 281.3 million Br to 1.60 billion Br, driven by 1.13 billion Br in uncleared foreign transfer effects and 100 million Br in interbank lending. Liabilities surged sharply to 945.4 million Br, including 725.4 million Br in letter-of-credit margin payables. Treasury bills, bonds, and other deposits grew by 88.4pc to 666.3 million Br. Total expense reached 1.229 billion Br while personnel expense increased to 534.8 million Br from 296.3 million Br. Wolde conceded that these decisions were deliberate, arguing that transport support and other benefits were necessary for staff retention.

For now, Gadaa Bank's second full year showed a bank that expanded quickly, remained liquid, maintained a thick capital cushion, and generated sufficient profit to reward shareholders.

PUBLISHED ON Apr 10,2026 [ VOL 27 , NO 1354]