Forex Windfall Puts Addis Bank on an Unsteady Pedestal

Nov 15 , 2025. By NAHOM AYELE ( FORTUNE STAFF WRITER )

Shareholder sentiment at Addis Bank echoed optimism tempered by caution. Paid-up capital, raised from 18,863 shareholders, increased to 2.5 billion Br, still short of the five billion Birr regulatory requirement due by mid-2026. However, analysts and executives alike acknowledged that last year’s performance owed much to a unique moment in monetary policy reform, raising questions about whether the Bank can preserve these gains as foreign-exchange conditions shift.

Addis Bank ended the last financial year as one of the most unusual performers in the banking industry. It stood out as a statistical outlier of exceptionally profitable, conservatively leveraged, fast-capitalising, and unusually liquid.

However, its strong results depended heavily on income streams that may not have matured into stable earnings. Its balance sheet for 2024/25 was strong by almost every standard measure, ranking above its peers in solvency, capital adequacy, and short-term earnings power, while also revealing a financial institution that moved away from the traditional interest-driven model that has shaped the industry’s long-term resilience.

According to industry analysts, the next test for Addis Bank may not be how fast it grows, but whether it can preserve these gains once the forex tide that lifted it begins to recede.

The mid-tier, third-generation Bank posted a net profit of 2.19 billion Br, a 430pc jump and one of the sharpest profit spikes seen in the industry in recent years. The surge pushed earnings per share (EPS) to 924 Br, up from 204 Br, marking a 353pc rise. Foreign exchange transactions accounted for 41.6pc of the profit, generating nearly 1.81 billion Br, making forex the dominant driver behind last year’s results.

“The Bank performed extraordinarily by any measure,” said Aminu Nuru, a financial analyst based in Doha, Qatar.

However, he obserevd that the Bank’s performance was tied to its ability to benefit from the monetary policy decision to float the Birr.

Across the industry, profit growth has remained between 18pc and 30pc, with a few high performers pushing margins through efficiency or portfolio discipline. Addis Bank’s profit before tax expanded nearly fivefold, a gap too large to attribute to normal banking activities. Forex translation gains of almost 1.8 billion Br drove the surge. Historically, such gains have proved temporary in reforming economies.

Hailu Alemu, president of Addis Bank, conceded that last year’s extraordinary foreign exchange performance was driven by the appreciation of the Bank’s foreign-currency assets and the lifting of the rule that required commercial banks to surrender 70pc of foreign exchange earnings to the National Bank of Ethiopia (NBE). The policy shift enabled banks to retain their foreign exchange reserves, thereby strengthening their financial position.

Aminu cautioned that much of the gain from foreign exchange transactions is unlikely to be repeated in the current fiscal year.

"This is a one-time macroeconomic shift," he told Fortune.

Addis Bank's Board Chairman, Kassahun Bekele, took a different view, praising management for its “prudent handling of foreign currency.” He argued that the profitability was largely due to sound foreign exchange management and careful loan distribution. Kassahun attributed the synergy between the Board and management to the financial results that he said pleased shareholders.

“We've met the minimum requirements set by the National Bank of Ethiopia,” the Chairman said. “Our profits are expected to remain strong. Overall, the Bank is now on solid ground.”

Addis Bank’s results painted the picture of an institution riding an extraordinary earnings cycle. Beneath the headline numbers, the Bank’s model appeared impressive and structurally fragile when compared to industry averages.

Its return on assets (RoA) of 11.2pc and return on equity (RoE) of nearly 50pc placed it outside the competitive frontier. Most banks operate with an RoA of about 1.9pc to 2.4pc and an RoE shaped mainly by leverage. Addis Bank achieved high profitability with moderate leverage, a combination more typical of niche financial institutions than banks still in expansion mode. A net profit of 2.2 billion Br, on average assets of 19.5 billion Br, produced an RoA five times the industry norm.

Even measured against closing assets, profitability remained high at 9.3pc, far above the usual two percent range for domestic banks.

Profit margin, asset turnover, and equity multiplier showed that Addis Bank’s earnings power rested on margin rather than leverage. A net profit margin of 41.5pc, more than double the industry’s 18pc to 25pc range, puts it firmly among the beneficiaries of the new foreign-exchange regime. Its income composition diverged from the industry’s usual structure, where around three-quarters of revenue comes from interest and spreads. Roughly two-thirds of Addis Bank’s revenue came from forex gains and fee-based activities.

Hailu, the president, shared analysts' doubts about replicating last year’s windfall.

“Our performance in foreign exchange may not match last year's,” he said.

But he expected strong overall results this year. He noted that although the dollar rate continues to rise, the Bank is managing its foreign currency carefully and has already exceeded its first-quarter target, signalling profits could remain high.

Last year, Addis Bank resembled a transaction-led and forex-exposed platform rather than a bank built on credit intermediation. The difference became sharper when examining the asset turnover ratio. A total income of 5.3 billion Br from average assets generated a turnover rate of 27pc, about 10 percentage points higher than large incumbents such as Awash and Dashen banks, which operated at rates of 15pc to 17pc. Its equity multiplier, around 4.5 times, was modest, far below the industry's typical leverage of eight to 16 times.

The balanced structure - high earnings and turnover paired with low leverage - helped push RoE toward 50pc, without the fragility often associated with aggressive gearing.

Capitalisation further distinguished Addis Bank. An equity-to-asset ratio of nearly 24pc placed it at more than double the industry’s average of nine to 13pc. Even strong performers such as Zemen Bank at 14pc or Dashen Bank at 15pc fell short. Equity expanded by 78pc year-on-year (YoY), outpacing asset growth of 53pc. Unusually, the windfall strengthened solvency rather than diluting it. Most mid-tier banks grow their assets faster than their equity and depend on share issuance or retained earnings to maintain their capital ratios.

Addis Bank, however, moved in the opposite direction.

Loan growth of 11.7pc lagged far behind the industry’s 22pc to 30pc expansion in the past two years. While banking activity nationwide was driven by pent-up demand, structural shifts in liquidity, and post-reform optimism, Addis Bank grew its credit cautiously. Yet, the quality indicators looked solid. A non-performing loan (NPL) ratio of 3.4pc was in line with industry averages and below regulatory limits.

According to Hailu, the Bank rigorously evaluates borrowers, checking credit history and overall credibility before approval.

“Their success is our success, their failure is our failure,” he said, stating close follow-up after disbursement.

Aminu praised the discipline.

Although 42pc of its loans went to export financing, a cyclical sector with concentrations most peers avoid, there was no sign of deterioration in asset quality.

Deposits grew 34pc, consistent with industry trends, producing a loan-to-deposit ratio (LDR) of 66pc, well within the comfort range of 60pc to 80pc used by most banks. Larger peers, including the Bank of Abyssinia, manage tighter liquidity with ratios of nearly 80pc. Addis Bank’s liquidity position appeared conservative. The deposit mix resembled the industry but included a sharp 70pc surge in demand deposits, signalling either stronger customer engagement or inflows linked to forex operations.

The income structure revealed Addis Bank’s deepest departure from the industry’s model. Interest income accounted for only one-third of revenue, compared to roughly three-quarters across the industry. Net interest income accounted for less than 20pc of total revenue versus an industry norm of above 70pc. Analysts warn that this shift boosted earnings under a liberalising forex regime but could leave the Bank exposed to volatility.

Aminu warned that costs could become a concern if windfall profits do not recur.

“The management should closely monitor expense growth,” he said.

Cost trends echoed industry patterns where personnel and administrative expenses accounted for two-thirds of total costs, similar to the typical 55pc to 65pc industry range. But, Addis Bank stood out not for cost discipline but for income growth so strong that it diluted its cost ratio. Many banks experienced a rise in personnel expenses that outpaced revenue growth, negatively impacting their profitability. Addis Bank benefited from the opposite dynamic.

According to Hailu, the rising personnel costs reflected deliberate salary adjustments aimed at retaining staff.

“The industry faces high turnover, but trained employees should not leave,” he said. “Adjusting salaries helps us retain them.”

The Bank’s 1,530 permanent staff and a similar number of outsourced employees received extensive training.

"Investing in employees helps sustain profitability," Hailu told Fortune, disclosing that some of his staff attended two or three trainings each.

Total assets rose 53pc to nearly 23.6 billion Br, from 15.4 billion Br the previous year. Aminu described it as “a significant expansion.” Compared to the industry’s average asset growth of 28pc, Addis Bank nearly doubled the pace. Yet, peers such as Abay Bank, at 66.4 billion Br, and Oromia Bank, at 114.6 billion Br, remained far ahead, demonstrating how much ground Addis Bank still needs to cover.

While assets climbed by 53.4pc, loans grew only 11.5pc to 9.7 billion Br, below the credit growth cap. The loan-to-deposit ratio (LDR) of 65.15pc fell below the industry average. RoA was 9.27pc, inflated by the policy shift. According to Aminu, the Bank could have “issued more loans and better utilised its deposits,” calling the low LDR evidence of idle funds.

Hailu rejected this view, arguing that his managment deliberately maintained an LDR near 65pc to meet withdrawal demands. According to him, Addis Bank aligned lending with the 14pc credit cap and managed liquidity prudently.

Loan distribution showed that 42pc went to domestic trade and services, an allocation the President characterised as "cautious and targeted at borrowers who can repay." The Bank focuses on coffee exporters, whose sector is performing well, giving confidence that loans will not turn into NPLs. However, Aminu pressed for more diversification.

Incorporated in 2012 with an initial equity of 109.4 million Br raised from 5,309 founding shareholders, including traditional saving cooperatives, Edirs, and farmers’ unions, Addis Bank’s shareholder base grew to 18,863 by the end of the last fiscal year. Paid-up capital grew to 2.5 billion Br, still below the mandatory five billion Birr required by mid-2026. At the general meeting last September, shareholders resolved to have 1.38 billion Br in dividends reinvested as paid-up capital.

A shareholder, Tamiru Tadesse, said the results “exceeded everyone’s expectations.” He expected a strong performance this year, but warned that policy shifts require management to remain vigilant.

Three years earlier, the shareholders' assembly decided to issue new shares. Between June 2025 and November, the Bank sold 1.1 billion Br worth of shares.

“These funds will help the Bank meet the minimum capital requirement,” Hailu said, noting that the target expected to take a year was met in three months. "Demand surged so quickly that branches were overwhelmed."

At the main branch on Jomo Kenyatta Street, near Bambis Supermarket, its manager, Mesfin Sileshi, primarily deals with exporters, who are the majority of his customers. He called the past year “a blessed year,” during which his branch generated nearly 100 million Br in foreign exchange earnings.

Customer confidence appeared strong. Deposits reached 14.6 billion Br, a 34pc rise. Digital channels processed 76.7 billion Br last year, supported by 44 ATMs and platforms, including Derash and Guzo Go. They handled 1.5 million transactions, though their profit contribution remained marginal.

PUBLISHED ON Nov 15,2025 [ VOL 26 , NO 1333]