Shareholders call for answers on poor performance, management uncertainty
One of the banking industry’s largest and newest entrants posted staggering losses of 460 million birr in the fiscal year that ended in July 2023.
The more than 180,000 shareholders of Amhara Bank were sorely disappointed by its shaky performance this year, and demanded explanations from executives and the board of directors during the general assembly held December 28, 2023, at the Golf Club.
“Shareholders and savers had placed so much faith in this bank. Teachers, farmers and the business community have high expectations,” said a frustrated Yeshitila Sewasew, a shareholder. “The bank should not forget the farmers and mothers who bought shares using their meager incomes.”
Amhara Bank executives’ claims that the losses were due to high expenditures on employee salaries and benefits did little to quell the disgruntled shareholders.
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“The bank registered a loss because we invested heavily in recruitment and branch expansion,” said Melaku Fenta, board chairperson.
The bank spent 1.1 billion birr on employee expenses, of which 666 million went to salaries and wages, while close to 300 million went to staff allowances. Amhara Bank operates with more than 4,500 staff across 267 branches opened since it joined the industry in June 2021.
Amhara Bank generated a total of 1.8 billion birr in 2022/23. Slightly more than half the revenues came from loan interest, 578 million birr from interest on Amhara Bank’s deposits in other banks, and 155 million from commissions and fees.
The bank spent a little over 300 million birr on savings interest, pushing its total spending, including employee and administrative costs, to 2.3 billion birr.
Expenditures on employee salaries and benefits account for more than a third of the bank’s spending.
“What about the shareholders?” asked a shareholder during the general assembly.
Martha Habte, another shareholder, worries the bank will continue to incur losses if it persists in hiring “a huge number of employees and paying them large salaries.”
“This will continue to affect shareholders’ returns,” she said.
Shareholders also expressed confusion about the recent shake up at Amhara Bank’s highest executive echelons.
Henok Kebede served as the first President of Amhara Bank from the time the central bank approved his nomination in late 2021, until he was terminated from his job in a controversial re-shuffling at the top of Amhara Bank’s management team.
Henok was the chief banking operations officer for Dashen Bank before he took the helm at Amhara Bank.
Henok was allegedly fired in response to issues relating to the bank’s performance.
Melaku told shareholders Henok’s departure is not pertinent to the general assembly.
“The board has the power to recruit any staff, including the president,” he said. “The general assembly can neither approve nor reject the president. Disclosing why the president left is of no use to the general assembly. Shareholders can ask about dividends and profits; not about the president or other employees.”
The controversy has left some shareholders shaken, but not Sisay Mengiste (PhD).
Sisay is a member of the Addis Ababa City Council and a shareholder of Amhara Bank. He argues it is expected that some businesses register losses in their early years of operation.
“Some institutions are grilled for minor errors, while others go unquestioned with huge mistakes,” he said.
Sisay pointed to Gadaa Bank, another new industry entrant, which reported 87 million birr in losses in 2022/23.
“We have to appreciate the achievements of Amhara Bank, such as the large number of new branches opened,” he said.
Bank executives and board members also sing a similar tune.
Chanialew Demissie, acting president, promised shareholders the bank would work to fix the losses registered due to high employee and administrative costs.
“We will adopt stringent and savvy policies this year,” he said.
Amhara Bank targets 437 million birr in profits this year. The bank’s total assets are valued at 28.4 billion birr.
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