Zemen Bank, a relatively modest player in the banking industry, has recently demonstrated an ability to punch above its weight in profitability and asset management, outperforming several of its larger competitors. Its noteworthy performance comes when the industry is becoming increasingly competitive, with more prominent banks dominating the market in equity and deposit mobilisations as well as loans and advances.

Zemen Bank's reported profit grew 22.3pc, reaching 1.81 billion Br, notably exceeding the average profit of 15 private commercial banks by 400 million Br. The Bank's profitability was also substantially higher than its peers, including Berhan, Bunna, and Oromia banks, marking a significant achievement for a financial institution of its size.

Despite the impressive profitability, Zemen Bank experienced a decline in Earnings per Share (EPS), which dropped by 25 Br to 430 Br. This dip, however, did not dampen the spirits of shareholders, who remained optimistic about the Bank's future.

Dereje Zenebe, president of Zemen Bank, addressed the shareholders' meeting held at the Millennium Hall four weeks ago and attributed the decline in EPS to recapitalisation, the Bank's investments in technology and skills acquisition.

An alumnus of Adds Abeba and Lincoln universities, Dereje came to the leadership of Zemen five years ago after a quarter century in the financial sector, including stints at Wegagen and Awash banks. Under his watch, Zemen Bank has also increased its paid-up capital by 37.2pc, reaching the regulatory minimum threshold regulators of the central bank set, with a deadline in 2026.

However, the Bank's EPS of 43pc displays its robust earnings capacity, eclipsing the industry average of 38.4pc. Its Return on Equity (ROE) and Return on Assets (ROA) were 24.3pc and 4.3pc, respectively, comfortably above the 19.8pc and 2.4pc industry averages.

Zemen Bank's performance in the industry is particularly notable given its undersized stature compared to larger competitors. The Bank's total equity stood at 8.4billion Br, nearly double its modest capital, while its total liabilities amounted to 39.3 billion Br, representing half the average for the 15 private banks. Along with its conservative leverage position, this tells of a cautious yet effective approach to risk management that Dereje and his directors have taken.

While larger banks such as Awash, Abyssinia, and Dashen continue to dominate in size and market share, Zemen Bank's achievements illustrated that smaller institutions can compete effectively through operational efficiency and profitability.

Substantial income growth from financial intermediation accompanied Zemen's growth as interest on loans, advances, and central bank bonds grew by 64.6pc to four billion Birr. The surge in income is attributed to increased extension of credits and more investment in securities combined with an increase in lending rates. The income from fees and commissions, gains from foreign exchange dealings and other activities swelled to a very modest figure of three percent to 1.73 billion Br.

However, the Bank's performance is not without its drawbacks.

The London-based financial statement analyst Abdulmenan Mohammed (PhD) recommended a watchful eye on the Bank's management on the interest expenses, wage hikes, and other operating expenses.

"These need serious attention," he cautioned.

Zemen Bank's operating expenses have seen significant increases, with interest expenses rising by 46pc to 1.37 billion Br and wages up by 46.9pc to 954.29 million Br. The rising costs have prompted calls from financial analysts and shareholders for a more mindful approach to expense management.

Incorporated in 2008 with 2,800 shareholders, Zemen Bank has built a robust capital base, with capital and non-distributable reserves increasing by 37.4pc to 7.13 billion Br. With its capital adequacy ratio (CAR) of 21.3pc, the Bank's total assets expanded by 36pc to 47.78 billion Br, a figure that, while lower than industry giants like Dashen and Awash, demonstrates a strong growth trajectory.