Wegagen Bank, which joined the list of the top three most profitable banks two years ago, reported a less than stellar performance in the last financial year.

Profits for the 23-year-old Bank slumped by 19pc to 625.7 million Br, leading its earnings per share (EPS) to plummet by 109 Br to 256 Br. In terms of EPS, Wegagen is one of the worst performers in the industry this past year.

The decline in EPS is a result of the decline in profit after tax coupled with capital expansion, according to Abdulmenan Mohammed, a financial statement analyst with close to two decades of experience.

Wegagen increased its paid-up capital by nine percent to 2.5 billion Br.

The previous year, the company amassed a huge profit due to 107 million Br in capital gains from the sale of its investment in Raya Brewery, according to Kindie Abebe, vice president of the Bank in charge of Corporate Services.

"Such gains didn't exist last year,” Kindie said. "The Bank wasn't also able to mobilise deposits as it expected, and as a result, it couldn't give loans as planned."

In the year Wegagen’s performance related to financial intermediation was solid. Interest income on loans and advances, treasury bills, NBE bonds and other deposits rose by 19pc to 2.5 billion Br.

"Despite the very challenging operating environment," remarked Mengisteab G. Kindan, board chairperson of the Bank, "the Bank continued to be profitable despite the registered growth in key indicators."

Double-digit inflation, poor export performance, unrest in some parts of the country, debt stress and the forex crunch were mentioned by the chairperson.

The main culprit for a reduction in profit is a considerable decline in commission fees and foreign exchange dealings income.

Non-interest earning activities - such as gains from foreign exchange, service charges and commissions - fell by 23pc to 652.1 million Br, undermining Wegagen's profit.

Wegagen should investigate the causes of the reduction and come up with a strategy to improve its performance in these areas, says Abdulmenan.

The total expenses of Wegagen expanded. Interest paid to savings soared by 37pc to one billion Birr due to expanding deposits. Salaries and benefits increased by 17pc to 794.2 million Br, and general administration expenses went up by 10pc to 569.5 million Br.

Salary raises for employees due to inflation and new staff recruitment to cope with branch openings combined to lift expenses, according to Kindie.

In the reporting year, Wegagen maintained a provision for the impairment of loans and other assets to 83.2 million Br, a decrease of six percent.

The level of provision for doubtful debts of Wegagen is reasonable, according to Abdulmenan.