Friday, September 16, 2011

Ethiopia’s Single-branch Bank Doubles Profits

Zemen Bank announces this week that it earned a gross profit of 121 million birr (around 7 million US dollars at the prevailing exchange rates) in the 2010/11 fiscal year (July 8, 2010 - July 7, 2011).
Net profits (after taxes) were  84 million birr (around 4.9 million US dollars), double the level of the previous year, and equivalent to an earnings per share of 58 percent. Zemen is one of the youngest and the only single-branch bank in Ethiopia. 
Last year was a very challenging period for the bank which clashed with the financial sector regulatory body (National Bank of Ethiopia) and split among shareholders over the election of a Board Chairman.
Supporting the Bank’s financial results was the rapid growth in all key operational measures. Deposits rose by close to 70 percent during the year, rising from Birr 688 million to birr 1.162 billion, while loans reached birr 633 million as of June 2011 compared to Birr 377 million a year earlier. According to the bank, foreign exchange inflows to the bank rose to USD 12 million per month and showed a 50 percent increase from the previous year.

Zemen Bank attributes its exceptional financial and operational performance in part to its unique business model which relies mainly on a single branch whose activities are supplemented by multiple service points such as ATMs, Internet Banking, Foreign Exchange Bureaus, and Banking Kiosks.

“This distinctive business model has allowed for low overhead costs without impacting the Bank’s deposit-taking, lending, and international banking activities,” the bank noted in its press statement sent to

The bank among other mentioned three notable accomplishments in the fiscal year ended July 7, 2011:

-Contrary to the common misconception that Ethiopia’s private banks focus their lending almost exclusively on sectors such as importers and domestic traders, Zemen Bank devotes 40 percent of its loan book to two key sectors widely recognized as national priorities.

“Indeed, the sectors to which we devoted the highest share of our loans were to exporters (23 percent of all loans) and to manufacturers (17 percent of all loans), areas which we believe can have transformative effects on Ethiopia’s economy,” the statement noted.

-More than 53 percent of our loans are devoted to medium- and long-term loans, a share that is higher than what is seen at most banks. “Through the delivery of such extended financing, the bank is making its own small contribution to addressing the scarcity of long-term faced by Ethiopia’s entrepreneurs.”
-The rapid growth in our lending operations has been achieved while simultaneously maintaining a low non-performing loan ratio of just 1.5 percent and a very high provision rate (including recoveries) of over 100 percent.

“Such prudent results are a result of our strict system of loan follow-up and monitoring and our rigorous use of modern risk management techniques, both of which will continue to safeguard the bank’s performance in the years ahead,” the bank said in its statement.