Editorial | Mar 28,2026
Tsehay Bank closed its last financial year with the profile of a young lender that had learned to grow but not yet to make growth pay. Its operating income exceeded one billion Birr, up by 33.7pc.
The Bank ended the year with a wider loss, weaker equity and a cost structure that strained against its income. The gap was becoming visible, as its assets reached 8.38 billion Br by June 2025, up by 35.6pc from a year earlier. Cash and cash equivalents nearly doubled to 1.98 billion Br, while debt and equity securities were 1.53 billion Br. Net loans and interest-free banking (IFB) financing reached 3.46 billion Br (a 38pc growth).
Total deposits increased by 29.4pc to 5.63 billion Br, including customer deposits of five billion Birr. By April 2026, the loan-to-deposit ratio had reached 78.26pc, with a liquidity ratio of 24.6pc in June 2025, above the 15pc regulatory floor, while other liabilities, mainly tied to operations and taxes, had declined to 1.19 billion Br.
During the year, the banking industry expanded assets by 44.5pc to 4.74 trillion Br, deposits by 40.7pc to 3.51 trillion Br and net income by 61.3pc to 93.4 billion Br. The industry's return on assets reached 2.5pc, return on equity (ROE) 27.4pc, capital adequacy 19.1pc and liquidity 30.4pc. Tsehay Bank outperformed the industry on asset quality and liquidity, pointing to market reach, balance-sheet formation and public acceptance.
According to Mekbib Tesfaye, a London-based financial analyst, Tsehay's 20pc financial health score unveiled a Bank strong in growth and market expansion but weak in profitability, efficiency and internal capital generation.
"The statements show dependence on external funding, aggressive deposit mobilisation and continued shareholder capital injections," he told Fortune.
Tsehay Bank’s loss widened to 271.4 million Br from 181.5 million Br, a 49.5pc deterioration. The Bank posted a loss of about 171,900 Br per employee, compared with peer banks, which generated an average profit of 310,655 Br an employee. Total comprehensive income swung from a positive 104.4 million Br to a negative 238.8 million Br, a reversal of 343.2 million Br.
Tsehay Bank's President, Yared Mesfin, acknowledged that high overhead costs and capital constraints weighed on profitability, but argued that investment in branches and digital infrastructure laid the foundation for sustainable performance. His recovery path rests on higher-margin services, including interest-free banking and trade finance, as well as productivity gains.
"The bank made measurable progress and strengthened its operating foundation," he told shareholders in a message published in the annual report the Bank released.
For Tadesse Ayenew, the Bank’s board chairman, the loss reflected a structural imbalance, with rapid expansion outpacing resources and paid-up capital. He called the year "a test of organisational resolve," marked by strong growth and severe operational and economic pressure.
"The next phase is to strengthen the financial base by meeting the paid-up capital requirement and shifting from network building to strategic consolidation and stricter cost discipline," he told shareholders in his statement published in the annual report for the 2024/25 financial year.
Tsehay Bank's paid-up capital grew only 9.9pc to 1.28 billion Br, far below the National Bank of Ethiopia's (NBE) five billion Birr threshold. Its total equity fell to 1.02 billion Br from 1.13 billion Br, leaving it below paid-up capital due to accumulated losses. However, the Bank's Management expects the decline in total equity to be offset by profit generated in the current financial year and expects discussions on additional capital raising.
Tsehay Bank’s return on closing assets was negative 3.24pc, compared with the weighted average return on assets of about 2.1pc across 11 banks in its peer group. These banks had a weighted loan-to-deposit ratio of 73.5pc, against Tsehay’s 61.6pc, based on total deposits. The Bank's 61.8 million Br deposit per branch paled in comparison with the average of 150 million Br for the 11 banks. Addis Bank posted deposits per branch of about 87.4 million Br, while Anbesa Bank reported around 129 million Br.
According to the Bank's Management, deposit mobilisation at the branch level was impacted by underperforming outlets, uneven resource potential across locations and instability in northern Ethiopia. Fifteen branches recorded performance below their prior-year levels.
At the Beklo Bet branch on Debrezeit Road, near the Bank's headquarters, this pressure could be perceptible. Hailemelekot Assefa, with 16 years of banking experience, manages a 10-person team, part of the Bank's 1,579 workforce, serving 150 to 200 walk-in customers daily and handles the rising use of mobile and internet banking. Despite challenges from staff turnover and regional economic volatility, he exceeded seven of his performance targets last year.
The Branch reached a total deposit balance of about 1.5 billion Br, including an additional 449 million Br mobilised in the first nine months of the current fiscal year. Of this, 297 million Br came from interest-free banking services.
Tsehay's branch network, 91 by the year's close, reveals why scale has not translated into earnings. Although visible, it was not dense enough to carry its cost. The Bank attributed this to inflationary pressures and corporate customers’ bargaining power, which weakened net interest performance.
Expenses reached 1.3 billion Br against operating income of 1.03 billion Br, while personnel and administrative costs absorbed about two-thirds of expenses. Wages, benefits and allowances totalled 463.3 million Br, and general costs reached nearly 399.5 million Br. Interest expense surged by 162.1pc to 417.5 million Br.
Tsehay Bank's managment disclosed plans to reduce the cost-to-income ratio below 75pc and to develop "a balanced strategy" for revenue optimisation and cost control this year. It seeks to grow interest and non-interest income through earning assets, foreign-currency operations, guarantees and equity investments.
“The framework also includes branch area downsizing initiatives and the merger of underperforming branches with nearby branches,” the Bank's managment said, responding to Fortune's queries, in a written statement. "Major expenditures now face tighter approval procedures."
The Bank's non-interest income declined in 2024/25, mainly due to lower commission income from letters of credit, the foreign-currency regime change, and intense competition in an industry in which it is a new entrant. A fourth-generation financial institution, headquartered at Meaza Desalegn Tower, Sierra Leone Avenue, Tsehay Bank was incorporated in July 2022, with a paid-up capital of 734 million Br.
With 8.38 billion Br in assets in an industry above 4.7 trillion Br, its share is below 0.2pc.
Since launching operations, its interest income has nearly doubled to 653.8 million Br, while interest expense has grown faster to 417.5 million Br. Net interest income was 236.3 million Br (22.9pc) of operating income. Non-interest income fell 14.9pc to 378.9 million Br.
Tsehay earned 38.3 million dollars in foreign currency during the year, with exports contributing 8.88 million dollars and remittances 6.72 million dollars. It also mobilised over 30 million dollars through Central Bank auctions and export activity.
Net loans accounted for 41.3pc of assets, compared with 40.6pc a year earlier. Cash and cash equivalents accounted for 23.7pc of assets, while debt and equity securities made up 18.3pc. At 3.51 billion Br, the Bank's combined liquid assets and investment securities reached 41.9pc of total assets. Although liquid assets accounted for about 36.3pc of deposits, above the Central Bank's minimum, analysts noted that Tsehay Bank's challenges remained in converting liquidity into profit.
The Bank's managment displayed a conservative lending practice, with a 61.6pc loan-to-deposit ratio, putting it closer to Ahadu and Addis banks, but without their earnings outcomes. Addis Bank, with a similar ratio of about 66pc, generated 2.2 billion Br in net profit and a return on assets above nine percent. Hibret Bank had 85.6pc, while Anbessa posted 82.3pc, and Amhara Bank 81.4pc.
However, asset quality was Tsehay Bank's strongest defence, posting a non-performing loan (NPL) ratio of 1.78pc, below the industry's 3.1pc and the five percent regulatory threshold. Its Stage 3 loans were about 2.1pc of gross loans, while Stage 2 and Stage 3 exposures together were 5.4pc. The expected credit loss allowance was only 0.69pc of gross loans and about one-third of Stage 3 exposure.
Yet, export and import loans accounted for about 61pc of gross loans, exposing the Bank to trade cycles, foreign-exchange shortages, import restrictions, logistics costs, and settlement delays.
Tsehay Bank's gap with mid-sized banks, such as Sidama and Ahadu, was wider, placing it between them in asset size and resulting in a large loss. Sidama Bank had assets of 5.52 billion Br, deposits of 3.67 billion Br and loans of 2.39 billion Br, but generated 70 million Br in net profit. Ahadu had 10.05 billion Br in assets, 7.88 billion Br in deposits and 4.34 billion Br in loans, with a net profit of 400 million Br.
Tsehay’s digital and interest-free banking record shows acceptance, not decisive earnings. IFB deposits reached 304.3 million Br, while Murabaha and Mudarabah financing amounted to about 84.5 million Br, and profit from these financing was only 8.65 million Br. The Bank's Management attributed constrained growth in IFB financing to the regulatory credit cap and plans to scale products as permitted.
The Management hopes that current-year measures are producing results, with a provisional profit of 476.1 million Br in the first 10 months, above its annual target. It credited "strategic initiatives" in mobilising stable foreign-currency sources and diversifying revenue through exports, remittances and cash purchases, resulting in non-interest income "more than doubling" by April 2026 compared with the same period a year earlier.
In its young age, Tsehay Bank's directors and executives have built a bank with comfortable liquidity, acceptable asset quality and real customer growth. However, earnings for shareholders remain absent, capital lacking, operating productivity low, and funding costs rising fast. The next reporting year will show whether the loss was the cost of building scale, as Management argued, or an early sign that the model needs deeper repair.
Mekbib urged the Management to shift from rapid balance-sheet expansion to a focus on quality and efficiency. His prescriptions are faster capital mobilisation to close the 3.72 billion Br gap to the regulatory threshold, stronger cost discipline, better operating leverage, more low-cost current and savings deposits, higher branch productivity and greater monetisation of digital banking infrastructure.
PUBLISHED ON
May 31,2026 [ VOL
27 , NO
1361]
Editorial | Mar 28,2026
Radar | Dec 01,2024
Fortune News | Apr 22,2023
Viewpoints | Jun 01,2019
Radar | Dec 20,2025
Fortune News | May 23,2026
Sponsored Contents | May 02,2023
Sunday with Eden | Dec 13,2025
Fortune News | Mar 28,2026
Radar | Jun 30,2024
Dec 22 , 2024 . By TIZITA SHEWAFERAW
Charged with transforming colossal state-owned enterprises into modern and competitiv...
Aug 18 , 2024 . By AKSAH ITALO
Although predictable Yonas Zerihun's job in the ride-hailing service is not immune to...
Jul 28 , 2024 . By TIZITA SHEWAFERAW
Unhabitual, perhaps too many, Samuel Gebreyohannes, 38, used to occasionally enjoy a couple of beers at breakfast. However, he recently swit...
Jul 13 , 2024 . By AKSAH ITALO
Investors who rely on tractors, trucks, and field vehicles for commuting, transporting commodities, and f...
Jun 13 , 2026
The recent policy decision to fully open freight forwarding to foreign capital may be...
Jun 6 , 2026
For a political veteran as controversial as Getachew Reda, last week's national elect...
May 30 , 2026
Tomorrow, millions of Ethiopians are expected to vote in the seventh national electio...
May 23 , 2026
An International Monetary Fund (IMF) team has spent weeks in Addis Abeba conducting t...
Loading your updates...