THREE YEARS PERFORMANCE TREND OF HIBRET’S SOUTH DISTRICT 2022

THREE YEARS PERFORMANCE TREND OF

HIBRET’S SOUTH DISTRICT

STRATEGY AND TRANSFORMATION

OCTOBER 2022

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THREE YEARS PERFORMANCE TREND OF HIBRET’S SOUTH DISTRICT 2022

Contents Pages
PART ONE ............................................................................................................................................ 1

INTRODUCTION ................................................................................................................................ 1
1.1Background .................................................................................................................................... 1
1.2 Objective ....................................................................................................................................... 1

PART TWO........................................................................................................................................... 2

OTHER BANKS’ PERFORMANCE TREND .................................................................................. 2

2.1 Total Deposit ................................................................................................................................ 2
2.2 Variation from Budget .................................................................................................................. 2
2.3 Percentage of branches below the budget ..................................................................................... 3
2.4 Average Deposits per Branch ....................................................................................................... 3
2.5 Loan to Deposit Ratio ................................................................................................................... 4
2.6 Performance of New Branches ..................................................................................................... 4
2.7 Lowest Performing Branches in South District ............................................................................ 5
2.8 Peer Banks’ Branches Selected South District Performance ........................................................ 6
2.8.1 Dashen Bank Deposit ............................................................................................................. 6
2.8.2 Dashen Bank Loan and Advance ........................................................................................... 6
2.8.3 Abyssinia Bank Deposit ......................................................................................................... 7
2.8.4 Wegagen Bank Deposit .......................................................................................................... 7
2.8.5 Awash Bank Deposit .............................................................................................................. 8
2.8.6 Awash Bank Loans and Advances ......................................................................................... 8
2.9 Reasons from South District Manager .......................................................................................... 9

PART THREE .................................................................................................................................... 14

3.1 CONCLUSION ........................................................................................................................... 14

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THREE YEARS PERFORMANCE TREND OF HIBRET’S SOUTH DISTRICT 2022

PART ONE
INTRODUCTION

1.1 Background

The performance of commercial banks can be affected by internal and external factors

(Flamini et. al., 2009) these factors can be classified into bank specific (internal) and

macroeconomic variables. The internal factors are individual bank characteristics which

basically are influenced by the internal decisions of management and board. The external

factors are sector wide or country wide factors which are beyond the control of the

company and affect the profitability of banks.1

It has been apparent that the South District’s performance in most of the indicators has

been declining for the past three years and the Bank inquired the situation to be

investigated also the trends of other banks to be looked at to find out if what is

happening is similar in other banks. However, if the low performance is due to some

internal factors to conduct an interview with the South District Manager and try to get to

the bottom of the issue.

1.2 Objective

The objective of this study is to:

 Find out the rate at which the performance is declining.

 See the performance trends of other banks.

 Understand weather the issue is internal or external.

 List all possible internal reasons.

1
Flamini, C., Valentina C., McDonald, G., Liliana, S. (2009) The Determinants of Commercial Bank Profitability in Sub-Saharan Africa. IMF
Working Pape.

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THREE YEARS PERFORMANCE TREND OF HIBRET’S SOUTH DISTRICT 2022

PART TWO

OTHER BANKS’ PERFORMANCE TREND

2.1 Total Deposit

The following table shows the total deposit growth rate of corporate, city and regional

districts. As the figures in the table show the growth rate was in an increasing rate from

2020 to 2021 however, from the 2021 to 2022 only half of the districts showed an

increasing growth rate trend. Half of them increased in a decreasing rate but the growth

rate of the south district dropped significantly from 35.7% in the previous year to 8.62%,

which was below the corporates growth rate of 22.8% of the fiscal year 2021/22.

Year Jun-20 Jun-21 Jun-22 Sep-22

Total Deposits 34,698,401,157 43,968,631,879 54,036,593,006 55,031,825,016

Growth Rates
Corporate 19.45 26.72 22.90 1.84
City Total 16.67 28.56 24.41 0.07
Central & East 36.23 21.90 24.85 (9.24)
North West 24.40 23.86 12.67 7.13
South 25.75 35.70 8.62 4.07
South West 27.57 41.80 46.98 2.50
Table 1: Total Deposits of city and regional districts

2.2 Variation from Budget

This next part shows the variation of corporate, city and regional districts’ performance

variation from the budget. As a result from all corporate, city and regional districts South

District registered the highest negative variation in June 2021 and June 2022 which were

-276,863 and -783,520.

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THREE YEARS PERFORMANCE TREND OF HIBRET’S SOUTH DISTRICT 2022

Variation from
Budget Jun-20 Jun-21 Jun-22 Sep-22
Corporate (4,329,734) 2,361,908 (963,407) 466,199
City Districts (3,021,440) 3,595,304 1,318,546 919,621
Central & East (339,592) -215,731 -606,128 -283,595
North West (187,482) 41,752 -57,361 165,982
South (591,942) -276,863 -783,520 -296,681
South West (249,326) -54,370 -102,472 -149,463
Table 2: Variation from budget city and regional districts

2.3 Percentage of branches below the budget

Percentage of branches that performed below the budget are listed in the following

table and even in this parameter the South District has the highest figure compared to

city and other regional districts with more than 75% of the branches on average

performing below budget for the last three years.

Percentage of
branches below the
Jun-20 Jun-21 Jun-22 Sep-22
budget
Corporate 76.49 50.27 70.50 60.65
City Districts 74.27 44.62 64.29 61.75
Central & East 78.05 55.32 73.08 68.00
North West 72.73 32.43 55.00 45.24
South 94.44 57.50 85.71 75.56
South West 81.82 44.00 61.29 62.50
Table 3: Percentage of branches below the budget of city and regional districts

2.4 Average Deposits per Branch

The average deposit per branch is also the lowest in the South District; it has been the

lowest for the past three years compared to corporate, city and other regional districts.

As of September 30, 2022 Birr 38,742 million per branch compared to the corporate’s

127,388 million per branch. Not only this but the south district has been the lowest

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THREE YEARS PERFORMANCE TREND OF HIBRET’S SOUTH DISTRICT 2022

performing district in the area of average deposit per branch with Birr 31,517 million in

June 2020, 38,491, and 39,819 million in June 2021 and 2022 respectively.

Average Deposits
per Branch Jun-20 Jun-21 Jun-22 Sep-22
Corporate 103,269 111,451 129,584 127,388
City Districts 149,946 187,637 206,764 200,205
Central & East 46,052 49,056 55,356 52,700
North West 55,439 61,243 63,826 65,453
South 31,517 38,491 39,819 38,742
South West 51,573 38,919 46,131 45,835
Table 4: Average deposits per branch of city and regional districts

2.5 Loan to Deposit Ratio

The loan to deposit ratio of the South District is among the highest in comparison with

others. For instance the Bank’s loan to deposit ratio was 81.85% as of September 30,

2022 while the South District’s LDR was 91.26% during the same period. Also it has been

among the highest loan to deposit ratio of all districts of the Bank for the last three

years.

LDR Jun-20 Jun-21 Jun-22 Sep-22

Corporate 76.99 78.93 81.21 81.85
City Districts 86.00 87.78 86.58 90.73
Central & East 41.53 40.73 36.81 49.16
North West 49.45 54.79 50.23 55.27
South 88.41 78.75 78.20 91.26
South West 86.99 93.63 68.88 98.02
Table 5: LRD of city and regional districts

2.6 Performance of New Branches

In comparison with corporate, city and other district offices the South District has

mobilized the least deposit by its newly opened branches, even lower than the South

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THREE YEARS PERFORMANCE TREND OF HIBRET’S SOUTH DISTRICT 2022

West District which has only 12 newly opened branches compared to the 16 branches in

the South.

Performance of New
Branches No New Branches Total Deposits Average per branch
Corporate 126 4,541,905 36,046.87
City Districts 67 3,267,406 48,767.25
Central & East 17 350,688 20,628.68
North West 14 342,690 24,477.88
South 16 209,984 13,123.97
South West 12 371,138 30,928.17
Table 6: Performance of new branches of city and regional districts

2.7 Lowest Performing Branches in South District

The growth rate of total deposit of low performing branches from South District is listed

in the table below since it is the complete one and when we look at the growth rate of

total deposit of each branch for instance take 2020/21 to 2021/22 has significantly

declined for all low performing branches except for Menaheria branch. From the selected

poor performing branches Dodola branch registered the highest growth rate decline

from 651.6% in 2020/21 to 37.2 in 2021/22, this might be due to the branches opening

date regardless these are the figures. Also Werabe branch has the lowest average growth

rate which is -9.9%.

Growth R. Growth R. Growth R. Average

Branches 2019 2020 2021 2022
2019/20 2020/21 2021/22 Growth R.
1 Arab Sefer Hawassa 35.2 38.9 59.4 60.5 10.5% 52.7% 1.9% 21.7%
2 Arada Shashemene 29.2 40.8 74.8 58.3 39.7% 83.3% -22.1% 33.7%
3 Arbaminch 34.3 39.4 48.8 58.9 14.9% 23.9% 20.7% 19.8%
4 Areka - 8.8 14.5 11.4 - 64.8% -21.4% 21.70%
5 Atote Hawassa 24.8 38 44.1 37.3 53.2% 16.1% -15.4% 0.3%
6 Bale Robe 44.5 41.9 74.9 54 -5.8% 78.8% -27.9% 25.4%
7 Dodola - 0.97 7.3 10 - 652.6% 37.0% 344.8%
8 Ginir - 9.5 24.2 31.1 - 154.7% 28.5% 91.6%
9 Hosaena 160.3 150.5 161.8 132.8 -6.1% 7.5% -17.9% -5.5%
10 Negele 9.8 14.1 31.2 49.7 43.9% 121.3% 59.3% 74.8%
11 Welaita Sodo 134.8 167.6 170.1 152.3 24.3% 1.5% -10.5% 5.1%
Table 7: Poor performing branches in south districts

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THREE YEARS PERFORMANCE TREND OF HIBRET’S SOUTH DISTRICT 2022

2.8 Peer Banks’ Branches Selected South District Performance

We have tried to see the total deposit performances of three peer banks’ namely:

Dashen Bank, Abyssinia Bank and Dashen Bank.

2.8.1 Dashen Bank Deposit

Among the competitors we took some branches of Dashen Bank’s deposits for three

consecutive years, showed yearly growth rate and the average growth rate. From the

selected branches of the Bank’s south district the lowest growth rate average was

registered by Negele branch. Generally the performance of the selected branches has

declined significantly from FY 2020/21 to 2021/22 with Hosaena being the lowest with

negative 7% growth rate.

In million birr
Branch Growth R. Growth R. Average
Branches 2020 2021 2022
Opening Date 2020/21 2021/22 Growth R.
1 Arab Sefer Hawassa Feb-96 492.1 642.7 661.5 30.6% 2.9% 16.8%
2 Arada Shashemene Apr-17 20.2 60.4 62.5 199.0% 3.5% 101.2%
3 Arbaminch Aug-08 127.6 156.3 183.6 22.5% 17.5% 20.0%
4 Areka Jan-17 41.8 79.8 114.3 90.9% 43.2% 67.1%
6 Bale Robe Sep-13 37.1 63.2 72.3 70.4% 14.4% 42.4%
7 Dodola Jun-16 24.5 39.2 42 60.0% 7.1% 33.6%
8 Ginir Mar-22 - - 12.3 - - -
9 Hosaena Jun-08 140.3 191.3 176.3 36.4% -7.8% 14.3%
10 Negele May-17 20.1 32 47.4 59.2% 48.1% 53.7%
11 Welaita Sodo Dec-06 190.1 258 269.2 35.7% 4.3% 20.0%

2.8.2 Dashen Bank Loan and Advance

The loans and advances of the Bank was also provided for the selected branches like the

deposit the loans and advances performance of Dashen had declined in growth rate

compared to FY 2020/21 to 2021/22, from all the selected branches Arada Shashemene

showed the highest total deposit growth rate decline from 618.8% to -59%. Similarly,

Negele registered the lowest average deposit growth rate (-40%).

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THREE YEARS PERFORMANCE TREND OF HIBRET’S SOUTH DISTRICT 2022

In million birr
Branch Growth R. Growth R. Average
Branches 2020 2021 2022
Opening Date 2020/21 2021/22 Growth R.
1 Arab Sefer Hawassa Feb-96 459 571.1 229.8 24.4% -59.8% -17.7%
2 Arada Shashemene Apr-17 4.8 34.5 38.8 618.8% 12.5% 315.6%
3 Arbaminch Aug-08 70.1 106.5 59.1 51.9% -44.5% 3.7%
4 Areka Jan-17 26.4 53.4 52.3 102.3% -2.1% 50.1%
6 Bale Robe Sep-13 8.8 7.5 13.3 -14.8% 77.3% 31.3%
7 Dodola Jun-16 8.3 16.7 15.1 101.2% -9.6% 45.8%
8 Ginir Mar-22 - - 0.03 - - -
9 Hosaena Jun-08 86.9 158 80.8 81.8% -48.9% 16.5%
10 Negele May-17 2.1 1.8 0.6 -14.3% -66.7% -40.5%
11 Welaita Sodo Dec-06 204.5 434.5 228.9 112.5% -47.3% 32.6%

2.8.3 Abyssinia Bank Deposit

The total deposit in Abyssinia’s case has been increasing for the past three years.

However, the growth rate has decreased for almost all the selected branches from

2020/21 to 2021/22 with Hosaena branch being the lowest -13.9%. Also the average

deposit growth rate was the lowest for Negele branche 28%.

In million birr

Branch Opening Growth R. Growth R. Average

Branches 2020 2021 2022
Date 2020/21 2021/22 Growth R.

1 Arab Sefer Hawassa Jul-99 258.2 372.3 466.5 44.2% 25.3% 34.7%
2 Arada Shashemene Mar-18 34.4 62.3 72.8 81.1% 16.9% 49.0%
3 Arbaminch Nov-06 122 174.6 224.5 43.1% 28.6% 35.8%
4 Areka Dec-19 12 17.4 41.7 45.0% 139.7% 92.3%
6 Bale Robe Mar-17 19.5 50.2 57 157.4% 13.5% 85.5%
7 Dodola Feb-22 - - 14.5 - - -
8 Ginir Aug-18 26 38.3 49.1 47.3% 28.2% 37.8%
9 Hosaena Jun-08 233.6 533 458.7 128.2% -13.9% 57.1%
10 Negele Aug-18 45.9 68.7 73 49.7% 6.3% 28.0%
11 Welaita Sodo Oct-11 85.1 128.3 157 50.8% 22.4% 36.6%

2.8.4 Wegagen Bank Deposit

All selected branches of Wegagen registered a small total deposit increment from 2020

to 2021. However, almost all branches’ deposit declined from 2021 to 2022. On the other

hand the deposit growth rate declined from 2020/21 to 2021/22, Arab Sefer Hawassa

showed the lowest growth rate which was -16%. Arbaminch had the lowest total deposit

average growth rate.

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THREE YEARS PERFORMANCE TREND OF HIBRET’S SOUTH DISTRICT 2022

In million Birr

Branch Growth R. Growth R. Average

Branches 2020 2021 2022
Opening Date 2020/21 2021/22 Growth R.

1 Arab Sefer Hawassa Dec-97 75.5 97.6 81.7 29.3% -16.3% 6.5%
2 Arada Shashemene Sep-16 13.5 15.2 14.4 12.6% -5.3% 3.7%
3 Arbaminch May-15 44.8 50 44.7 11.6% -10.6% 0.5%
4 Areka NA - - - - - -
6 Bale Robe May-17 8.4 10.1 13.1 20.2% 29.7% 25.0%
7 Dodola NA - - - - - -
8 Ginir Jul-17 - - - - - -
9 Hosaena Sep-14 38 45.6 44.7 20.0% -2.0% 9.0%
10 Negele Aug-17 22 26.7 26.9 21.4% 0.7% 11.1%
11 Welaita Sodo Jan. -2015 44.4 58.1 40.6 30.9% -30.1% 0.4%

2.8.5 Awash Bank Deposit

Unlike the other three peer banks listed above Awash Bank registered a significant total

deposit increment in almost all branches and the growth rate is not in a decreasing rate

for some branches. According to the average deposit growth rate it looks like Arada

Shashemene registered the lowest that is 15%.

In million birr
Branch Opening Growth R. Growth R. Average
Branches 2020 2021 2022
Date 2020/21 2021/22 Growth R.
1 Arab Sefer Hawassa Nov-16 73.6 285.7 411.8 288.2% 44.1% 166.2%
2 Arada Shashemene Apr-97 340.4 309 434.3 -9.2% 40.6% 15.7%
3 Arbaminch May-14 83.3 96.3 148.3 15.6% 54.0% 34.8%
4 Areka Nov-18 28 53.6 95.4 91.4% 78.0% 84.7%
6 Bale Robe Dec-03 263.1 320 344.5 21.6% 7.7% 14.6%
7 Dodola June-15 74.9 120.7 128.1 61.1% 6.1% 33.6%
8 Ginir Sep-11 130.7 160.3 177.9 22.6% 11.0% 16.8%
9 Hosaena Nov-13 130.4 178.6 240 37.0% 34.4% 35.7%
10 Negele May-12 121.5 191.7 251.9 57.8% 31.4% 44.6%
11 Welaita Sodo Mar-10 107 166.7 271.8 55.8% 63.0% 59.4%

2.8.6 Awash Bank Loans and Advances

The loans and advances of the Bank have been increasing significantly with the exception

of one branch which was Hosaena which showed a decline in the amount. The loans and

advances growth rate were in an increasing rate for more than half of the selected

branches with Hosaena being the lowest (22.6%). Likewise, the average growth rate was

the for Hosaena branch (1.7%).

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THREE YEARS PERFORMANCE TREND OF HIBRET’S SOUTH DISTRICT 2022

In million Birr

Branch Opening Growth R. Growth R. Average

Branches 2020 2021 2022
Date 2020/21 2021/22 Growth R.
1 Arab Sefer Hawassa Nov-16 64.4 390.9 716.1 507.0% 83.2% 295.1%
2 Arada Shashemene Apr-97 320.7 473 622 47.5% 31.5% 39.5%
3 Arbaminch May-14 47.1 50.6 65.2 7.4% 28.9% 18.1%
4 Areka Nov-18 15.6 29.7 38.3 90.4% 29.0% 59.7%
6 Bale Robe Dec-03 61.5 67.5 92.1 9.8% 36.4% 23.1%
7 Dodola June-15 19.3 31.7 47.9 64.2% 51.1% 57.7%
8 Ginir Sep-11 54 67.5 86.3 25.0% 27.9% 26.4%
9 Hosaena Nov-13 48.8 39.4 48.3 -19.3% 22.6% 1.7%
10 Negele May-12 49.6 78.8 177.2 58.9% 124.9% 91.9%
11 Welaita Sodo Mar-10 106 128.6 188.6 21.2% 46.7% 33.9%

2.9 Justifications from South District Manager

It is well noted that many reports including end-of-mission press release

statements of IMF staff visit announced on 21st June, 2022, on reform plans and

economic developments in Ethiopia discusses multiple shocks including the

COVID-19 pandemic, drought, conflict in the north of Ethiopia, and the war in

Ukraine hitting the Ethiopian economy have dampened growth, further increased

inflation and created fiscal and external pressures which undoubtedly have a

direct impact on the Banking sector.

Having said the above, I will try to highlight specific causes that contributed to

undesirable deposit performance of branches under our domain:

 Disruption of the coffee export market which led to tied up of sales

proceeds of coffee (Still the suppliers are battling with exporters to get

their funds)

 Security concern in areas where our branches are located which in turn

deters free movement of people and goods; there is still a huge security

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THREE YEARS PERFORMANCE TREND OF HIBRET’S SOUTH DISTRICT 2022

concern in Negele Borena, Bule Hora, Moyale, Yabello, and Jinka areas

and these branches are still operating below their full capacity;

 As can be seen from historical deposit data of branches even before the

establishment of the District, the numbers of branches under our domain

have been operating below budget which in turn makes it difficult to clear

their backlog and to pull these branches out of mediocrity.

 Poor saving culture of the community

 The area is dominated by production of cash crops and the saving culture

of the community is very poor. As the District’s deposit structure shows

that the core deposit accounts for 98% leaving the share of the Term

Deposit to be only 2% which in turn made our District’s deposit to be

fuelled by steady growth of the core deposit with little or no option for

significant amount of TD.

 Environmental Scanning

Our scanning of the operating environment showed that other competing Bank

Districts are also affected by the above factors. For instance, BOA’s Hawassa

district is the least district in terms of deposit performance among the Districts,

and only 10% of CBE’s 30 branches in Hawassa managed to achieve their deposit

target.

Branches’ opinion

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 Staff establishment problem

Branches frequently complained that it is becoming difficult for them to handle

the job with only three CSOs or CSCs ( since the fourth one is a vault user)

especially at times when any of the staff is absent from office for different

compelling reasons.

 Credit Sanctioning

Branches have been frequently complained about the existing modality of

granting loans on a 50% (short term) and 50% (medium term) manner

mentioning the payment burden and they mentioned a number of their branch

borrowers left the Bank. Especially, our branches operating in Oromiya Regional

State heavily challenged by the recently graduated MFI's to Bank status like

"Sinquee" Bank which grant Term Loans up to five years and thus our prominent

borrowers are leaving to join these Banks to get Medium Term loans.

 Failure to engage concerned bank units in the budget process

There is no practice of engaging District offices in the Budget process. Branches

also frequently complained about the same and the budget is allocated without

considering the current deposit status of the branch and other factors in their

vicinity lacking the basic notion of a budget should be SMART.

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Here it is important to mention the recently allocated budget of Birr 32

Million to Moyale Branch recently downgraded to sub -branch status by the

NBE.

 Inaccessibility of our Bank service as evidenced by limited branch

network and deployment of ATMs

Competing banks especially BOA, Awash, and Dashen Banks have been opening

branches in each and every Woreda Town simply by considering their linkage

effect. Besides, especially BOA deploy ATMs as and when they open branches

and considering ATM as one compulsory item in the branch opening checklist.

Despite the captioned reasons, our office has planned to curve out the issue

in the new FY by implementing the following initiatives

 Approaching coffee exporters in Hawassa and Dilla areas so as to induce

them to do the export business thru our Bank

In this regard , we are able to convince Hawassa branch coffee suppliers to

export thru our Bank and so far we managed to get 290K USD from two

exporters and another export proceed from the third supplier amounting USD

270K is in the pipeline.

 Approaching Universities and other Government offices to Bank with us

In this regard, we have approached Dilla University and our offer is being

evaluated.

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 Holding frequent discussions with branches and exercising close follow on

performance of the same so that each branch will surely come out of

mediocrity”.

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THREE YEARS PERFORMANCE TREND OF HIBRET’S SOUTH DISTRICT 2022

PART THREE

3.1 CONCLUSION

In this document we have tried to see the deposit, loan and gross profit

performance trends of peer banks’ South District selected branches and relatively

Awash Bank showed an increasing trend for almost all the selected branches.

However, the rest of the three peer banks showed a declining trend both in total

deposit and loans and advances. The rate the total deposits of Hibret Bank’s

selected branches have been declining is higher than the four peer banks.

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