Debub Global Bank , which joined the banking industry as the 15th private bank in August 2012 , incurred significant losses compared to other newcomers, during its first 11 months of operations. The annual audited report released during the second annual general shareholders meeting, held on December 21, 2013 , at the Millennium Hall, disclosed that the Bank has finished the year by reporting a loss of 14.3 millionBr.Even though making a loss is common for newcomers to the industry, the amount reported at Debub Global is huge. Debub has earned a total income of 14.8 million Br, while spending 29.1 million Br in interest and staff and general administration expenses. Out of the total expenses, 16.8 million Br has been spent on general administration. This must have been due to an aggressive move to enter the industry. Debub has total assets of 380.6 millionBr.It has disbursed loans and advances of 99.4 million Br and mobilised deposits of 158.4 millionBr.The Bank has achieved a loan to deposits ratio of 62.8pc. The total assets held by Debub. loan disbursements, deposit mobilisation and loan to deposits ratio is lower than that of all other newcomers in their first year of operation. "This must have been due to Debub having entered the industry while it is saturating and the competition becoming fierce," says Abdulmena Mohammed Hamza, an accounts manager for the Portobello Group Ltd - a London -based holding company with subsidiaries in property investment and development. "The situation indicates that Debub will face a tough time ahead. It needs to come up with strategies to outperform others." Debub has invested 27.8 million Br in five year National Bank of Ethiopia (NBE) bonds. This investment represents seven percent of the total assets and 18pc of the total deposits of the Bank. The young entrant started floating shares in August 2009 . After raising around 266 million Br in subscribed capital from 5,481 shareholders, the Bank held its first general assembly on September 19, 2010 . Having previously presented the other documents required, Debub Global submitted its nominees for its board of directors in December 2010 . This move enabled the Bank to escape the NBE's directive, which raised the minimum paid-up capital requirement from 75 million Br to a whopping 500 millionBr. The directive issued in September 8, 2011 , was a major entry barrier to banks under formation, which were required to come up with the full amount prior to establishment. This was unlike banks that were already in operation, which were given a five-year window to raise the equity. Liquidity ratio indicates that Debub is a very liquid bank. Its liquid assets to total assets ratio is 40pc and its liquid assets to total deposits stands at 96pc. Debub has a paid up capital of 127.5 million Br and a capital adequacy ratio of 114pc. The young entrant needs to raise its paid up capital by 58pc a year to comply with the NBE directive that compels private banks to have a paid up capital of Birr 500 million by 2016, according to Abdulmena. "This reveals that Debub will have a very hard time ahead to raise such amount of capital per year, "he said. "The job will be even harder unless Debub reverses its losses to a reasonable profit." Credit and foreign exchange constraints and the current paid-up capital requirements are going to be challenging for those involved in the sector, says Alemayehu Dibaba , a senior banking expert, who has been in the banking sector for several years. Currently, all banks are also expected to buy Treasury bills with 27pc of every loan disbursement, as of April 2011 . This has caused liquidity problems for most banks, leading to a formal complaint from the Bankers Association in June 2011 . The Central Bank gave no response, but banks are now looking into new deposit mobilisation schemes. New banks are best advised to seek revenue from non-credit services, according to the expert. Debub Plans to raise the required paid up capital through the sale of shares. The Bank plans to raise 700 million Br by 2017, mainly through the selling of shares. But established banks who are also vying for new shareholders will toughen the competition, the expert argues.
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