Wegagen Bank, one of Ethiopia's mid-sized banks, posted a record profit of 2.2 billion birr (18.5 million US dollars) for the fiscal year ended June 30, 2024.
The bank's profit surged 86 percent from the previous year, driven by a 40 percent increase in revenue to 9.8 billion birr. The lender's net interest income rose 39 percent to 4.8 billion birr, while its net fees and commission income jumped 56 percent to 2.1 billion birr.
"We are pleased with our performance, given the challenging economic environment," said Abdishu Hussien, the bank's chairman. "Our strategic initiatives to increase revenue, manage costs, and improve operational efficiency have paid off.
Income Soars to 9.8 Billion Birr
The bank's revenue surged 40 percent to 9.8 billion birr, driven by a 39 percent increase in net interest income to 4.8 billion birr and a 56 percent jump in net fees and commission income to 2.1 billion birr.
Wegagen Bank's net interest income rose 39 percent to 4.8 billion birr, driven by a 22 percent increase in loans and advances to 45.1 billion birr. The bank's net interest margin expanded to 5.5 percent, up from 5.2 percent in the previous year.
The bank's net fees and commission income jumped 56 percent to 2.1 billion birr, driven by an increase in transaction volumes and fees. Wegagen Bank's fees and commission income from international transactions rose 75 percent to 741 million birr, while its fees and commission income from domestic transactions increased 45 percent to 1.3 billion birr.
Return on Equity Reaches New Heights
Wegagen Bank's return on equity (ROE) reached 23.1 percent, exceeding the industry average. The bank's strong capital growth relative to risk-weighted assets led to a capital adequacy ratio (CAR) of 14.45 percent, above the regulatory requirement of eight percent.
The bank's ROE was driven by its strong profit growth and efficient capital management. Wegagen Bank's profit after tax rose 86 percent to 2.2 billion birr, while its total capital grew 33 percnet to 9.2 billion birr.
Credit Growth Defies Economic Headwinds
Wegagen Bank achieved a notable 13.6 percent growth in loans and advances, reaching 45.1 billion birr. This is slightly lower than the 14 percent credit cap placed on all commercial banks since the beginning of the reporting period.
Wegagen Bank's loan growth was driven by an increase in demand for credit from the private sector, particularly from small and medium-sized enterprises (SMEs). The bank's SME loan portfolio grew 25 percent to 10.3 billion birr, driven by the bank's strategic initiatives to support SMEs.
Loan to Deposit Ratio Reflects Prudent Risk Management
Wegagen Bank's loan-to-deposit ratio remained stable, reflecting its prudent risk management practices. The bank's total deposits grew by 22 percent to 52.1 billion birr, while its loans and advances increased by 13.6 percent to 45.1 billion birr.
The bank's loan-to-deposit ratio stood at 86.5 percent, indicating that the bank has maintained a prudent risk management approach. Wegagen Bank's liquidity ratio also remained stable, indicating that the bank has sufficient liquidity to meet its short-term obligations.
Capital Growth Exceeds Regulatory Requirements
Wegagen Bank's total capital grew by 33 percent to 9.2 billion birr, exceeding the regulatory requirements. The bank's paid-up capital also grew by 27 percent to 5.1 billion birr, driven by an increase in retained earnings and a rights issue.
The bank's strong capital growth relative to risk-weighted assets led to a capital adequacy ratio (CAR) of 14.45 percent, above the regulatory requirement of eight percent. Wegagen Bank's CAR was driven by its "strong profit growth and efficient capital management."
