Amhara Bank Annual Report English

ANNUAL REPORT 2022
www.amharabank.com.et 1
Table of Contents
Message from Chairperson of the Board of Directors.............................4
Message from The CEO.........................................................................7
Board of Directors’ Report....................................................................12
External Auditors’ Report......................................................................21
Statement of Pro昀椀t or Loss And Other Comprehensive Income...........27
Statement of Financial Position.............................................................28
Statement of Changes in Equity............................................................29
Statement of Cash Flows ................................................................... 30
Notes to the Financial Statements .......................................................31
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Beyond Financing! 2
MESSAGE FROM
CHAIRPERSON OF THE
BOARD OF DIRECTORS
Dear honorable shareholders, it is my

pleasure to present our 昀椀rst historic Annual
Report of Amhara Bank for the 2021/22 FY,
on behalf of my fellow Board members and
myself. I also feel delighted to have been
part of and led the remarkable journey that
the Bank has undertaken to stand 昀椀rmly
where it is today.
The year was marked with a great

achievement for all of us, as we all
successfully realized our ambition to bring
the Bank into service. The success would
not have been possible if it were not for
the synergized efforts of teams organized
to establish the Bank, shareholders,
organizing committee and staff
demonstrating their resilience in the face
of a host of testing situations, and worked
in tune with the operating context and
regulatory stipulations to nurture a solid
footing for the future. Most importantly, the
strong public acceptance and unfaltering
support provided by shareholders mainly
become our strength and ardent spirit to
work with synergy toward the common
goal of launching ABa into the industry
successfully on June 18th, 2022.
Over the year, the country has been facing

multidimensional shocks, emanating both
from the national and global situations. The
effects of the prolonged war and political
instabilities across many parts of Ethiopia,
which have long been affecting economic
Beyond Financing! 4
ANNUAL REPORT 2022
activities in some places, driving up in昀氀ation and Upon the of昀椀cial commencement 72 branches
disrupting the supply chain, further accentuated became operational and the number increased
by the global commodity price hike and energy to 75 by the end of June 30, 2022. The Bank
crisis triggered mainly owing to the war between has also embarked to pursue its commitment of
Russia and Ukraine. Despite these and other realizing digital accessibility by deploying eight
challenges from other external and industry- ATMs in Addis Ababa and Bahir Dar as a token.
speci昀椀c situations, the policy and administrative
responses taken by the government and With respect to 昀椀nancial returns, the Bank
the various deep reforms made so far have generated total revenue of Birr 531 million, which
underpinned the positive trajectory registered in was mainly contributed by share-subscription
the year at the national as well as industry levels. fees collected during share sells. And it incurred
total expense of Birr 294 million, resulting a pro昀椀t
Nonetheless, over the course of the year, the before tax of Birr 237 million as of June 30, 2022.
harmony of all stakeholders who worked together
as a single and supportive ABa family, turned The endeavor to raise share capital, prior to
out to be our lever to unleash our commitment, licensing, was also a success as the Bank was
organize resources, and become more strategic able to amass a notable amount of Birr 4.8 billion
to confront all the challenges and establish all the paid-up capital from scratch. The amount could
enabling situations; while placing customers at have been signi昀椀cantly higher if the remaining
the center of our efforts and activities. shareholders who did not sign the Memorandum
of Association did.
The period under review was also notably marked
by the execution of various major works aiming at Going forward, given the practically manifested
formulating more appealing value propositions to interest of customers to work with us, and most
better meet client needs, tap into market potential importantly, the openly declared aspiration of
across the various segments, augment market the Bank to provide more inclusive service to our
reach through diversi昀椀ed means, foster new ways customers, we will be committed to deliver superior
of working that are anchored on agile, innovative customer service by designing different products
and collaborative principles, attract and develop and services that cater to the needs of different
a talented and diverse workforce and build the segments of society in domestic, international
image of the Bank. and interest free baking platforms. Furthermore,
to establish a sustainable relationship with
Alongside the aforementioned tasks, the support customers and attract new ones, the Bank will
from our shareholders and community at large continue deepening our diversi昀椀cation strategy
primarily motivated us and triggered the urge via both branch network and digital channels.
to commence the operation before the end of
FY 2021/22. The wide public acceptance was Towards realizing our ambitions to be “The
observed the moment the Bank opened its door Game-Changing Bank”, the extensive focus shall
to the public, queue of customers 昀氀ooded in all also be given to fostering operational excellence,
branches. These, as a result, helped us to attract innovation, and the digitalization of our
more than 82 thousand customers within the operations. To this end, in addition to automating
remaining 11 working days of the 昀椀scal year and the customer service and back-of昀椀ce operations
mobilized Birr 401.1 million, backed by 1,425 using advanced technologies, prior attention will
competent and motivated staff. be given to provide different tech savvy digital
products, such as: omni-channel banking, digital To this end, the Bank is hiring international
branch, ITM and Mobile branches. consultant to craft its Five-Year Strategic Plan
and ten Years implementation roadmap, in
We will also ensure that our principle of providing collaboration with in-house counterparty team
service beyond 昀椀nancing are well embedded to facilitate knowledge transfer and seamless
in our day-to-day activities, and hence, we will implementation.
work further toward addressing the interest of
customers across individual, retail, and SME To maintain the momentum the Bank has had so
customer segments subsequently. far and effectively meet its long-term objectives,
shareholders’ engagement in supporting the Bank
The unprecedented change of the banking and mobilization of their personal and business
industry landscape, following Council of Ministers associations is paramount.
decision of allowing foreign investment in the
昀椀nancial sector and participation of non-昀椀nancial Meanwhile, the Bank will continue to give due
service providers, such as: telecoms and 昀椀ntechs focus to recruite staff, which have the right skill-
in 昀椀nancial service delivery, will bring both set and attiude; and conduct extensive staff
opportunities and challenges. In order to lesson development to enhace their capabilities and level
these challnges and enhance the capcity to of engagement. The Bank will also continue to
leverage the advantages, the exising banks have fully rollout the performance management system
already commenced to take alternatives mitigative and automate human resource system.
decisions, such as deciding to raise their paid-up
capital. Finally, I would like to express my sincere
appreciation to our esteemed customers for their
To this end, despite the Bank joining the industry trust and con昀椀dence, and would like to reassure
with a historically higher initial paid-up capital, it them that we will continue to accompany them in
is still notably lower than most of the front-runner realizing their ambitions. I, also, wish to express
existing banks and going forward the amount my sincere gratitude to the management of
will be less able to adequately accomdate all the the Bank and our talented employees for their
expected changes. commitment and relentless effort to bring the Bank
into operation. In addition, I would like to take this
Hence, it is essential to raise the level of paid-up opportunity to once again express my deepest
capital both through fu昀椀ling the existing subscribed appreciation and gratitude to our shareholders
capital as well as approving additional shares to be for your unwavering trust and support provided
subscribed for the coming period, mainly to make in all respects. Last but not least, I would like to
the Bank more competitive, enable it effectively commend the National Bank of Ethiopia for its
cope up with the unprecedented changes, and guidance and support.
prevail over the competition foreign and domestic.
Along with the aforementioned tasks, the Bank is

also working to remain vigilant in the market and Melkau Fenta
proactively respond with the appropriate strategy. Chairperson, Board of Directors
Beyond Financing! 6
ANNUAL REPORT 2022
MESSAGE FROM
THE CEO
I am honored to convey my maiden

message on the annual performance
report of Amhara Bank, as a founding Chief
Executive Of昀椀cer. I am also glad to have
been entrusted to lay a solid foundation
for the Bank and bring the dreams of the
people who invested most in this initiative
alive. This could not have been materialized
if not for entwined effort and commitment
exerted, organizing committee, Board of
Directors and staffs.
Amhara Bank started its operation in the

face of a hostile environment when the
country has been undergoing a host of
challenges emanating both from domestic
and global fronts. The global economy
which has been weathering the challenge
posed by COVID-19 had confronted
with new challenge, i.e., Russia-Ukraine
war, reversing the gains from pandemic
recovery, exacerbated supply-chain
disruption, notably affecting production
activities, deepening in昀氀ationary
pressures, squeezing real income and
undermining macroeconomic stability in
all economies. On the domestic front, the
Ethiopian economy has been buffeted by
a con昀氀uence of shocks in the year mainly
with recurrent war in the northern part and
con昀氀icts elsewhere the prevalence of the
prolonged political con昀氀ict and war, which
led to no or slow economic activities in
the war-ravaged areas. However, against all public made it possible for the Bank to register
these odds, the country remained resilient and commendable performance in its maiden
exceeded expectations in registering positive year of 2021/22 FY. Accordingly, the Bank
growth. Hence, despite these challenges the mobilized Birr 401.1 million using more than 82
banking industry has shown strong out-turns in thousand depositors attracted by 75 branches
most key performance indicators. in the reporting period. Besides, the Bank also
generated a revenue amounting to Birr 531
As major endeavors in the 昀椀rst year of its million, expended Birr 294 million and registered
establishment, kick-starting the Bank’s initial a pro昀椀t before tax of Birr 237 million, which was
operation effectively and building the competencies notably contributed by the share subscription fee
that allows it to ensure providing quality services collected during the sale of share capital. On the
to its customers were the utmost attention of all other hand, the Bank has also shown its devotion
stakeholders in the year. In effect, all resources to being digitally accessible since its inception by
and capabilities were geared towards pursuing operationalizing eight ATMs in Addis Ababa and
executable strategies that could support building Bahirdar by effectively integrating with the Eth-
sustainable capabilities so as to deliver long- Switch payment system.
term values for all stakeholders. Consequently,
the effort made for the pre-operation stage has As an important objective going forward, we
昀椀nally bore fruit, which made Amhara Bank reality remain committed to further embedding its
by successfully joining the industry on June 18th, strategic aspiration of becoming “The leading
2022 with a colorful inaugural ceremony held at and game changing Bank in Africa” alongside
its headquarters. Its opening of 72 branches in meeting its well-established philosophy of
its 昀椀rst day was also unprecedented, which later “Beyond Financing”. Mindful of these, therefore,
increased to 75 branches at the end of the 昀椀scal we will do what it takes to address the needs
year. The day was also marked with conducting of different segments of society through our
various corporate social responsibilities, such development 昀椀nancing wing in an increasingly
as sponsoring Anbessa City Bus tickets for all proactive and adaptive manner. Besides, along
travelers in Addis Ababa, providing gifts for those with continuing to put into application different
who gave birth in selected hospitals across the advanced technologies to automate its operation
width and breadth of the nation, donating blood and enhance operational excellence, the Bank
to save thousands of lives, and tree plantation will deploy digital service offerings to leverage
by staff, along with different activities undertaken the availability of tech-savvy and educated youth
using branches opened in different locations. using omni-channel banking, ATM, PoS; and
digital branch in addition to concluding integration
Building on the efforts by various stakeholders with other organizations that facilitate digital
in bringing the Bank operation to fruition and payment system and enhancing accessibility
consequent engagement in meeting the high further.
expectation of our customers and the general
Beyond Financing! 8
ANNUAL REPORT 2022
Furthermore, the unprecedented change of the Ethiopia, the Financial Intelligence Center, and
banking industry landscape following Council of other stakeholders for their supervision and
Ministers decision of allowing foreign investment support. Besides, I would like to express my
in the 昀椀nancial sector; participation of non- appreciation to teams from the project of昀椀ce and
昀椀nancial service providers such as telecoms organizing committee for your remarkable efforts
and 昀椀n-tec in 昀椀nancial service delivery; will and commitment and to the Board of Directors for
bring both opportunities and challenges. Hence, your valuable support, dedication, and guidance
the Bank needs to be vigilant on the dynamics in steering the Bank in organizing resources and
in the operating environment and respond with time to bring the Bank into operation successfully.
appropriate strategy. To this end, the Bank is
hiring international consultant to craft its Five- I am sure, with patronage of our esteemed
Year Strategic Plan and ten Years implementation customers on our side, support and guidance from
roadmap, in collaboration with in-house the Board of Directors, and dedicated leadership
counterparty team to facilitate knowledge transfer and staff, we will reach the height of our vision and
and seamless implementation. exceed expectation, in satisfying all stakeholders.
Finally, I wish to express my sincere gratitude

to our esteemed customers who chose to bank
with us and were our strength in the journey to
lay a sturdy foundation. In the same vein, I wish
to express my sincere gratitude to our employees Henok Kebede
for their hard work in helping the organization CEO
meet its objectives and to the National Bank of
Beyond Financing! 10
ANNUAL REPORT 2022
BOARD OF DIRECTORS’ REPORT
The Board of Directors of Amhara Bank presents the highlights of the major progress registered
in key banking operations and the Auditor’s Report to the 昀椀rst Annual and Extraordinary General
Assembly of shareholders for the year ended June 30, 2022.
1. MAJOR PRE-OPERATING WORKS support staff according to the staff

establishment plan as per the guideline
Before the Executive Management of昀椀cially prepared for the purpose;
took over the transitional process in December  Commencing the deployment and
2021, some management members had been application of an ef昀椀cient and modern
working with the project of昀椀ce and Board Core Banking System and datacenter
of Directors in order to swiftly conclude the that allows streamlining the banking
transitional process and commence operation. application effectively;
Consequently, the Executive Management
 Worked on to develop various
along with other professional staff of the Bank
conventional, interest free and digital
and close support of Board members had
banking products/service offerings;
been working relentlessly and collaboratively
in order to execute various projects and major  Conduct early assessment to identify
works according to the action plan in order to potential areas for branch expansion in
effectively kick-start its initial operation as well different parts of the country, and identify,
as lay solid foundation for the period ahead. negotiate and secure feasible branch
The major tasks that were undertaken during premises;
this time include:  Worked with brand consultant and
external capacity to aggressively promote
 Crafting and approving various policies, the Bank and undertake pre and post
procedures, guidelines, manuals, and launching branding activities;
templates in alignment with the Bank’s
long-term aspiration, governing body  Regular updates to the Board of Directors
directives, rules and regulations; regarding the interim progress made
on planned activities so that timely and
 Initiating and procuring of昀椀ce equipment appropriate directions were provided;
and furnitures through bid with close
support from the relevant Board Sub-  Extending unstinted and collaborative
committee; efforts to ful昀椀ll the requirement of
the National Bank of Ethiopia to get
 Leasing the head of昀椀ce and main branch permission for the provision of different
building and making it ready for work; conventional and interest-free banking
 Select and recruit professional and operations;
ANNUAL REPORT 2022
 Gathering and consolidating data of Deposit Mobilization as of June 30,

the shareholders found in various 2022
banks, preparing pro昀椀les of the Board
of Directors, submitting an application
to the National Bank of Ethiopia to start 28.5 ,
the signing of the signatures of the 7.1%
shareholders on the Memorandum of Demand
Association; Deposits
 Preparing the annual plan for FY 2021/22

and 2022/23 and commencing the Total Deposit Savings
401.1 Deposits
implementation, and others.
2. OPERATIONAL HIGHLIGHTS 372.6 ,

92.9%
Deposit Mobilization
The pro昀椀tability of banks hinges on the Reaching Out Customers

effective and ef昀椀cient mobilization of resources.
Since the Bank launched its operations,
Consequently, due engagement and efforts
customers remained at the center of our
were directed to establishing foundation that
attention, and this heavily led us to dedicatedly
would enhance the Bank’s capcity in resource
deliver more quality services. Accordingly,
mobilization for the period and years to come.
aiming to attract and retain customers
Accordingly, various activities were undertaken
aggressively and prevail in the industry, various
to underpin the deposit mobilization process.
major initiatives that provide innovative and
This includes, but not limited to, developing
convenient propositions to the customers,
the required information technologies and
such as mass branch opening, aggressive
infrastructures, providing effective and ef昀椀cient
promotional campaigns, launching various
products/services, expanding branches across
products and services, and partly commencing
the width and breadth of the nation, continuously
digital services were some of major endeavors
conducting extensive promotional and image
executed in the reporting period. Hence, more
building activities, and deploying adequate,
than 82 thousand depositors opened in the 11
well-trained and quali昀椀ed staff at all levels.
days of the 昀椀scal year. Of these, 98% or 80,251
are saving depositors, while the remaining
Against the backdrop of these endeavors, the 10
728 and 1,035 accounts were opened by
Bank mobilized total deposit of Birr 401.1 million
demand and interest free banking depositors,
in just 11 working days of the 2021/22 FY. Of
respectively.
these deposits, saving deposit accounted the
lion’s share of 93% (Birr 372.6 million); while
the remaining amount (Birr 28.5 million, 7%) is
from demand deposit.
Branch Expansion charge (Birr 325.8 million), which was
signi昀椀cantly contributed by share subscription
As set in the strategic plan of the Bank to fees, while the effort to get interest income from
address the need of unbanked as well as banked depositing funds in other commercial banks
communities, diversi昀椀cation of accessibility was the second largest income source during
is one of the core values of the Bank. It is to the reporting period (Birr 182.1 million). The
this end that the Bank put into operation 72 Bank has also generated income of Birr 22.5
branches at a time on its colorful inauguration million from net gain on foreign exchange by
day. Subsequently, the Bank opened additional managing foreign currency mobilized from
three branches and brought the total number diaspora shareholders.
of branches to 75 at the end of FY 2021/22.
To effectively run the branches and continue Structure of Income as of June 30, 2022
to increase their number with such swift pace, 0.1%
they are organized under three regions, i.e., Interest From Other
Northern, South East and South West regions. Domestic Banks
34.3% Net Gain On Foreign
Exchange
Furthermore, as the number of branches is one
61.4% Service Charges
of the determinant factors to reach out customers Birr 531
and mobilize deposit, various preliminary works Other Income
were undertaken for branches that opened
subsequently. 4.2%
3. FINANCIAL HIGHLIGHTS
Expense
Asset
As of June 30, 2022, the total expense of the
As of June 30, 2022, the total asset reached Birr Bank is Birr 294 million. Of the total expense, the
7.1 billion. Of the total asset, the fund deposited largest proportion of Birr 174 million was paid
in other commercial banks took the lion’s share for the operating expenses mainly to 昀椀nance
of 81% or Birr 5.7 billion. expenses related to advertisement, payment
effected to register shareholders on Document
Paid-up Capital Authentication and Registration Agency
(DARA) and other administrative expenses
The total paid-up capital of the bank as of incurred before and after the commencement
June 30, 2022 was Birr 4.8 billion. The amount of operation. Whereas, the amount paid for
of paid-up capital would have been higher staff salaries and bene昀椀ts, depreciation and
11
if the shareholders who did not sign on the impairment of property, plant and equipment,
Memorandum & Article of Association did. amortization of intangible assets, and interest
expense paid for depositors constituted the
Revenue remaining amount of Birr 101.6 million, Birr
12.7 million, Birr 3.7 million, and Birr 2.1 million,
The total revenue the Bank as of June 30, correspondingly.
2022, is Birr 531 million. Of the total income,
about two-thirds was obtained from service
ANNUAL REPORT 2022
Structure of Expense as of June 30, 2022 higher number of branches, the signi昀椀cant part
0.7% Interest of the staff size was assigned to work at the
branch: 88% (1,249 staff), while the remaining
Salaries & Benefits
staff assigned to work at different head of昀椀ce
34.6% Amortisation units.
59.2% Depreciation
Birr 294
As a contemporary organization aspiring to
Mill. Other Operating
Expenses triumph and become one of the key actors
1.3% in the industry, human capital development
4.3% is an integral part of its effective strategy
implementation. In effect, various major
capacity development activities and preliminary
Pro昀椀t works including putting into operation different
policies and procedures, conducting need
As a result of the aforementioned income and
assessment, conducting various trainings
expense, the Bank registered a gross pro昀椀t
and onboarding programs with internal and
before tax of Birr 237 million as of June 30,
external capacity were some of the few worth
2022. Consequently, the earning per share for
mentioning activities in the period under review.
the share capital with a par value of Birr 1,000
Accordingly, as of June 30, 2022, the Bank has
stood at Birr 40.80 for the reporting period.
organized various training programs for 1,277
staff with a total investment of Birr 4.6 million.
4. NON-FINANCIAL HIGHLIGHTS Besides, continuous improvement works have
also been undertaken to automate human
People Management resource processes which particularly includes
12
effectively processing of data collection, storing,
Ful昀椀lling the right level of staff is one of the
dissemination and analysis.
most important factors to effectively rollout
the transition processes and create a suitable
Information Technology
ground for the years to come. Accordingly, all
the relevant stakeholders have made tireless
In line with the Bank’s overall objective of
efforts in order to select staffs that have the right
providing wide-ranging, accessible, reliable,
skillset having extensive banking experience
and innovative 昀椀nancial and non-昀椀nancial
as well as who ful昀椀ll the requirements of the
solutions through state-of-the-art technology,
National Bank of Ethiopia.
utmost attention and adequate resources
were dedicated to the development of modern
Accordingly, 1,408 permanent and 17 contract
technologies. It has been simpli昀椀ng our
staff were employed as of June 30, 2022. A look
processes, build resilience in our operations
at the staff mixes shows that sizeable part of the
and provide our customers with an enjoyable
staff managed to be professional with at least a
experience at every interaction with us in our
bachelor degree (67 percent of the total staff).
quest to become “The Leading and Game-
While the remaining (33 percent) are support
Changing Bank in Africa”.
staff, and of which, most of them are security
of昀椀cers. Owing to joining the market with a
Inherently the Bank begun its endeavor in this Digital Banking
regard by successfully deploying the 昀椀rst phase
of the CBS in collaboration with the vendor (T24) In addition to developing different systems
and the implementer (USI). The initial stage, that and infrastructure to streamline the operation,
enabled the Bank to streamline and commence ABa, has also been engaging in developing
customer creation, account opening, and basic technological capabilities to avail alternative
transactions for customers, was successfully digital banking service offerings. To this end,
completed before the it opened its doors to the the effort to reach the customer via ATM
public. Designing and building various critical machines has already commenced since
modules that required streamlining various the onset of its initial operation using the 昀椀rst
products and services and underpinning the eight machines in Addis Ababa and Bahir Dar
back-of昀椀ce processes, such as Retail, Finance, by successfully integrating with Eth-Switch
and Interest Free Banking were also completed to accept other banks’ cards. In parallel,
and put into operation. Besides, the Bank has the systems for reconciling and settling the
also continued developing other modules, such transactions for ATM has developed, and the
as Credit and Trade Services. process to procure additional ATM and POS
machines has commenced. Later, the effort
In order to swiftly commence operation, the to get alternative options for card issuance,
Primary and Secondary Server, Active Directory, which will be operationalized until the Bank
and Domain Controller were installed, the FTP established its own card personalization
server for all branches was con昀椀gured, and the system, has already commenced.
issue tracking system was customized.
To enhance the presence and visibility of its
The Bank has also successfully integrated with digital banking products and services, the
EthSwitch, DARA, NBE, and Ethio Telecom; preliminary works have also started to develop
while undertaking SMS gateway and the 昀椀rst the capabilities that could cater to the Bank’s
phase of the share management system. competitive edge by using hi-tech and digitally-
enabled platforms across all touch points, such
With respect to the data center, until the Bank as mobile, internet, and agency banking.
could establish its own data center, which is
highly recommended to be constructed in own Risk Management
building due to the notable investment and
security issues, a decision was made to 昀椀nd an As key enablers to achieve our strategic
alternative option. Hence, the Bank concluded objectives, the risk management process is of
datacenter colocation service agreement strategic importance to the Bank, and to this
with Ethio-telecom, and subsequently, all end that due emphasis was laid on embedding
the infrastructure resources were installed, a more rigorous risk and compliance system.
con昀椀gured, and became ready for operation As a new entrant institution, Amhara Bank also
before the Bank commencement of its initial could be exposed to a multitude of risks that
operation. would have their own rami昀椀cation, requiring
sound and proactive risk management system.
ANNUAL REPORT 2022
Hence, with the ultimate goal of creating a safer across the nation on its of昀椀cial inauguration
and more secure business environment, utmost day, tree plantation in various places and
attention has been given and an independent organizing the Bank’s staff to donate blood in
Risk and Compliance Management Department various regions, were some of the few worth
was established in line with regulatory mentioning corporate social responsibility
requirement, to implement an effective risk activities undertaken in the period. As a follow-
management system and develop a risk culture up of Bank’s long-term aspiration of creating
across the Bank by enhancing risk response sustainable partnership with the community,
decisions, reducing operational surprises the Bank has already commenced conducting
and losses, identifying and managing cross- a thorough assessment in order to identify the
enterprise risks, and providing integrated priority areas which should be addressed in the
responses to multiple risks. forthcoming period, and which will also enable
the Bank to ef昀椀ciently and effectively design,
By developing and implementing a robust implement and manage all the initiatives
Risk Management Program (RMP), the unit meant to embed the its engagement with the
commenced the identi昀椀cation of potential risks communities in the future.
during its establishment, which may pose long-
term impacts, and recommended mitigation Way Forward
techniques for risks that could potentially
impede its operation. Amhara Bank has joined the Ethiopian
banking industry when the market faced with
Mindful of the growing national and international unprecedented dynamics in terms of policy
regulatory requirements, the relentless effort shift as well as players mix. The policy shift
also made to employ effective Anti-Money which paved the way for entry of foreign banks,
Laundering/Countering the Financing of establishment of capital market, allowing
Terrorism (AML/CFT) systems across the Bank telecoms to engage in the 昀椀nancial sector,
to protect the Bank from potential 昀椀nancial and including foreign telecom operators and other
non-昀椀nancial losses. 昀椀ntechs brought the industry to a new level of
dynamics. To the extent that the development
Corporate Social Responsibility entails both opportunities and challenges,
in which the Bank is working on proactively
In its enduring commitment to discharge social respond so as to overcome the challenges and
responsibilities and as part of meeting one of the tap opportunities.
Bank’s strategic objectives of making business
beyond 昀椀nancing, the Bank gave due attention To this end, the Bank is engaged in various
and allocated resources for various corporate key initiatives and projects including IT, digital
social responsibility activities and initiatives in and human capital in order to excel in these
the few working days of the year. vital fronts and be able to navigate seamlessly
through the dynamics.
Sponsoring Anbessa City Bus tickets for all
travelers in Addis Ababa and providing gifts To account for the unprecedented changes
for those who gave birth in selected hospitals in the industry as well as the changes in the
global and macro settings, and to respond to culture amongst our employees and continuing
these changes, the Executive Management to invest in them to develop a future-ready,
and Board of Directors of the Bank found it talented and engaged workforce, avail
necessary to review the existing strategy. For reliable and convenient service quality, foster
this, renowned international consulting 昀椀rm will customer service relationships, enhancing
be hired. resource mobilization and utilization capacity,
To remain viable in the competitive environment, establishing a more streamlined organization,
deploying state-of-the art technology and digital excelling process effectiveness, maintaining
excellence would make a difference. Hence, and enhancing strong brand image.
these will continue to be key focus area. The
Bank will further accelerate the use of cutting- Simulteanously, it is also the Bank’s topmost
edge technologies towards making banking priority to continue pursuing its philosophy
operations much more effective and ef昀椀cient, of making business “Beyond Financing”. As
and accessible to its valued customers. This aspiring community bank, Amhara Bank is
will play a pivotal role in helping the Bank to tap committed to sustain and support customers
to emerging opportunities through wide-ranging ranging from individuals to SMEs and make
payment solutions and allowing our customers its contribution to the welfare of the society
to undertake transactions in an easier, faster, through executing various socially responsible
and safer way. initiatives to establish a long-term relationship
with the community at large.
Moreover, in an attempt to build a sustainable
future for all stakeholders and promote Building on the achievements so far, and
operational excellence, the Bank will further considering the dynamics in the operating
collaborate and exert its level-best-effort to environment, Amhara Bank will remain true to
execute all the preset initiatives. And these its promise anchored in its “Beyond Financing”
focal areas are: enhancing its accessibility via tag line and make difference in the way of doing
physical and digital channels, availing a wide business and live up to its vision of becoming
range of products/services that will continue “Becoming the leading and game changing
to address the interest of different segment bank in Africa”.
of the society, instilling a high-performance
ANNUAL REPORT 2022
የአማራ ባንክ የምረቃ እና

የስራ አጀማመር ፎቶዎች በከፊል
ANNUAL REPORT 2022
o r t
r ’ s Rep
udit o
a l A
Extern
INDEPENDENT AUDITOR’S REPORT ON THE ACCOUNTS OF AMHARA BANK
SHARE COMPANY
Report on the Audit of the 昀椀nancial statement
Opinion
We have audited the 昀椀nancial statements of Amhara Bank Share Company speci昀椀ed on page 3-45,
which comprise the statement of 昀椀nancial position as at 30 June 2022, the statement pro昀椀t or loss
and other comprehensive income, statement of cash 昀氀ows and statement of changes in equity for
the period from 11 February 2022 to 30 June 2022, and notes to the 昀椀nancial statements, including
a summary of signi昀椀cant accounting policies.
In our opinion, the accompanying 昀椀nancial statements present fairly, in all material respects, the
昀椀nancial position of the Company as at 30 June 2022, and its 昀椀nancial performance and its cash
昀氀ows for the period from 11 February 2022 to 30 June 2022 in accordance with International Financial
Reporting Standards (IFRSs).
Basis for Opinion
We conducted our audit in accordance with International Standards on Auditing (ISAs). Our
responsibilities under those standards are further described in the Auditor’s Responsibilities for the
Audit of the Financial Statements section of our report. We are independent of the Company in
accordance with the Ethiopian Code of Ethics for Professional Accountants, and we have ful昀椀lled
our other ethical responsibilities in accordance with these requirements. We believe that the audit
evidence we have obtained is suf昀椀cient and appropriate to provide a basis for our opinion.
Responsibilities of Directors for the Financial Statements
The Directors are responsible for the preparation and fair presentation of the 昀椀nancial statements in
accordance with International Financial Reporting Standards (IFRSs), and for such internal control
as Directors determines is necessary to enable the preparation of 昀椀nancial statements that are free
from material misstatement, whether due to fraud or error.
In preparing the 昀椀nancial statements, the Directors are responsible for assessing the Company’s
ability to continue as a going concern, disclosing, as applicable, matters related to going concern and
Providers of Audit and Assurance, Mangement Consultancy and Tax Advisory Services
using the going concern basis of accounting unless Directors either intend to liquidate the Company
or to cease operations, or have no realistic alternative but to do so.
The Directors are responsible for overseeing the Company’s 昀椀nancial reporting process.
Auditor’s Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the 昀椀nancial statements as a whole
are free from material misstatement, whether due to fraud or error, and to issue auditor’s report that
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee
that an audit conducted in accordance with ISAs will always detect a material misstatement when it
exists. Misstatements can arise from fraud or error and are considered material if, individually or in
the aggregate, they could reasonably be expected to in昀氀uence the economic decisions of users taken
on the basis of these 昀椀nancial statements.
Report on other Legal and Regulatory requirement
We have no comment to make on the report of your Board of Directors so far as it relates to these
昀椀nancial statements in accordance with the Commercial Code of Ethiopia of 2021 (Proclamation No-
1243/2021), recommend approval of the 昀椀nancial statements.
Tafesse,Shisema and Ayalew Certi昀椀ed Audit Partnership

Chartered Certi昀椀ed Accountants (UK) Addis Ababa
Authorized Auditors (ETH) 26 October 2022
Providers of Audit and Assurance, Mangement Consultancy and Tax Advisory Services
AMHARA BANK SHARE COMPANY
CORPORATE INFORMATION
FOR THE PERIOD FROM 11 FEBRUARY 2021 TO 30 JUNE 2022
Company registration number

MT/AA/1/0052689/2014 E.C (Ethiopian Calender)
License number
LBB/028/2022 G.C (Gregorian Calender)
Directors (As of 30 June 2022)
Melaku Fanta Chay Board of Director ( Chair Person) (Appointed February 2021)
Ababu Emru Zeneb Board of Director (Member) (Appointed February 2021)
Ayinalem Baylie Board of Director (Member) (Appointed February 2021)
Berhan Hailu Dagne Board of Director (Member) (Appointed February 2021)
Gambi PLC (Gebeyaw Tiruneh DR.) Board of Director (Member) (Appointed February 2021)
Gomeju Oil Eth. (Tewodros Yeshiwas) Board of Director (Member) (Appointed February 2021)
Hailemariyam Temesegen Mekonnen Board of Director (Member) (Appointed February 2021)
Letenah Ejigu Wale (DR.) Board of Director (Member) (Appointed February 2021)
Mesenbet Shenkutie Abebe Board of Director (Member) (Appointed February 2021)
Mulugeta G/Medhin Kassie (DR.) Board of Director (Member) (Appointed February 2021)
Seid Nuru (DR.) Board of Director (Member) (Appointed February 2021)
Solomon Wondimeneh Banjaw Board of Director (Member) (Appointed February 2021)
Executive management (As of 30 June 2022 )
Henok Kebede Tadesse Chief Executive Of昀椀cer (Appointed December 2021)
Kindie Abebe Alemayehu Chief Corporate Services Of昀椀cer (Appointed December 2021)
Chanyalew Demissie Bekele Chief Banking Operations Of昀椀cer (Appointed December 2021)
Dawit Teffera Degefu Chief IT Of昀椀cer (Appointed December 2021)
Hailu Moges Teklu Deputy Chief People Of昀椀cer (Appointed December 2021)
Adugna Abebe Alemneh Regional Vice President (Appointed December 2021)
Eshete Yemata Aycheh Regional Vice President (Appointed December 2021)
Be昀椀kadu Chernet Bisewer Deputy Chief Digital Banking Of昀椀cer (Appointed February 2022 )
Bizuayehu Seyoum Tsehaye Chief Banking Business Of昀椀cer (Appointed January 2022)
Belay Gorfu Kerssie Chief Strategy and Innovation Of昀椀cer (Appointed January 2022)
Mengistu Hailu Tsegaye Regional Vice President (Appointed January 2022)
Abeba Yohannes Gebremedihen Director, Talent Management (Appointed December 2021)
Alemayehu Te昀椀re Girefe Director, Digital Operations (Appointed December 2021)
Aschalew Tamiru Gebremichael Director, Marketing & Corporate Communication (Appointed December 2021)
Ayelign Abuhay G/Egziabher Director, Share Administration (Appointed December 2021)
Behailu Gulilat Bisrat Director, Internal Audit (Appointed December 2021)
Firehiwot Girma Kebede Director, Risk Management and Compliance (Appointed December 2021)
Getu Bedilu Hailemariam Director, Talent Development (Appointed December 2021)
Lealem Getachew Fikre Director, International Banking (Appointed December 2021)
Nigatu Wolde Asfaw Director, Research & Development (Appointed December 2021)
Teshome Abebe Beyene Director, Development Financing and Advisory (Appointed December 2021)
Zeweldu Betremariam Demessie Director, Engineering Service (Appointed December 2021)
Elias Tirit Gelaw Director, Property Administration and Facilities (Appointed December 2021)
Eskiyas Tafesse W/Tsadik Board Secretary (Appointed February 2022)
Mes昀椀n Beyene Belay Director, Finance (Appointed February 2022)
Osman Mohammed Yimer Director, IFB (Appointed February 2022)
Admass Mulugeta Asefa Executive Assistant to the CEO (Appointed January 2022)
Endalish Woldemichael Taye Director, Strategy and Change Management (Appointed January 2022)
Fentabil Fikdau Demeke Director, Branch Operations & Customer Experience (Appointed January 2022)
Ghenet Berhane Ghebru Director, Corporate Banking (Appointed January 2022)
Mulugeta Ambelu Fenta Director, Credit Analysis & Portfolio Management (Appointed January 2022)
Wubalem Fekadeselassie Lemma Director, Digital Banking (Appointed January 2022)
Ermias Zewde Desta Director, Applications Development and Systems (Appointed March 2022)
Melaku Meseret Mengistu Director, Legal Services (Appointed March 2022)
Tamrat Andarge Agiz Director, Technology Infrastracture (Appointed March 2022)
Independent auditor
Tafesse Simachew and Ayalew (TMS Pplus) Certi昀椀ed Audit Partnreship
Chartered Certi昀椀ed Accountants
P.O Box
Addis Ababa
Ethiopia
Corporate of昀椀ce
Amhara Bank Share Company
Kirkos sub-city,Woreda 07,Around Laghar
P O Box 28450 Code 1000
Addis Ababa, Ethiopia
ANNUAL REPORT 2022

REPORT OF THE DIRECTORS
The directors submit their report together with the 昀椀nancial statements for the period ended 30 June
2022, to the members of Amhara Bank (“ the Bank”). This report discloses the 昀椀nancial performance
and state of affairs of the Bank.
Incorporation and address
Amhara Bank (ABa) is a share company was established on February 08, 2022 with business
license issued as per banking business proclamation no. 592/2008. It commenced operation with an
authorized and paid up capital of birr 4.8 billion and 6.5 billion respectively. It comprises astonishing
number of shareholders amounting more than 141,000.
Principal activities
The Bank aspired to be accessible to the segments of the community that the 昀椀nance industry did
not pay attention to and to assist individuals who lacked access to 昀椀nancing, in order to enhance
their economic activity. Furthermore, ABa aims to use the enabling conditions to provide an excellent
service that appeals to the ever-diversifying and growing needs of customers that are demanding
more from banks in the form of personalized and competitive banking services.
Results and dividends
The Bank’s results for the year ended 30 June 2022 are set out on page 27 The pro昀椀t for the year
has been transferred to retained earnings. The summarised results are presented below.
30 June 2022
Birr’000
Net interest income 180,086
Pro昀椀t (loss) before tax 236,964
Tax (charge) credit (39,853)
Pro昀椀t (loss) for the year 197,111
Other comprehensive pro昀椀t / (loss) net of taxes -
Total comprehensive pro昀椀t (loss) for the year 197,111
STATEMENT OF DIRECTORS’ RESPONSIBILITIES
FOR THE PERIOD ENDED 30 JUNE 2022
In accordance with the Banking Business Proclamation No. 592/2008, the National Bank of Ethiopia
(NBE) may direct the Bank to prepare 昀椀nancial statements in accordance with international 昀椀nancial
statements standards, whether their designation changes or they are replaced, from time to time.
The Bank’s Directors is responsible for the preparation and fair presentation of these 昀椀nancial
statements in conformity with accounting principles generally accepted in Ethiopia and in the
manner required by the Commercial Code of Ethiopia of 1243/2021, and for such internal control
as management determines is necessary to enable the preparation of 昀椀nancial statements that are
free from material misstatement, whether due to fraud or error. The Bank is required keep such
records as are necessary to:
a) Exhibit clearly and correctly the state of its affairs;

b) Explain its transactions and 昀椀nancial position; and
c) Enable the National Bank to determine whether the Bank had complied with the provisions of the
Banking Business Proclamation and regulations and directives issued for the implementation
the aforementioned Proclamation.
The Bank’s Directors accepts responsibility for the annual 昀椀nancial statements, which have been
prepared using appropriate accounting policies supported by reasonable and prudent judgements
and estimates, in conformity with International Financial Reporting Standards, Banking Business
Proclamation, Commercial code of 1243/2021 and the relevant Directives issued by the National
Bank of Ethiopia.
The Directors is of the opinion that the 昀椀nancial statements give a true and fair view of the state of
the 昀椀nancial affairs of the company and of its pro昀椀t or loss.
The Directors further accept responsibility for the maintenance of accounting records that may
be relied upon in the preparation of 昀椀nancial statements, as well as adequate systems of internal
昀椀nancial control.
Nothing has come to the attention of the Directors to indicate that the company will not remain a
going concern for at least twelve months from the date of this statement.
Signed on behalf of the Directors by:
Melaku Fenta Henok Kebede

Board Chairperson Chief Excutive Of昀椀cer
ANNUAL REPORT 2022

STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
30 June 2022
Notes Birr’000
Interest income 5 182,143

Interest expense 6 (2,058)
Net interest income 180,086
Other operating income 7 348,860

Total operating income 528,945
Personnel expenses 8 (101,597)

Amortisation of intangible assets 14 (3,686)
Depreciation and impairment of property, plant and equipment 15 (12,735)
Other operating expenses 9 (173,963)
(291,981)
Pro昀椀t before tax 236,964

Income tax expense 10,a (39,853)
Pro昀椀t after tax 197,111
Other comprehensive income (OCI) net on income tax
Items that will not be subsequently reclassi昀椀ed into pro昀椀t or loss:

Remeasurement gain/loss on retirement bene昀椀ts obligations -
Deferred tax liability/asset on remeasurement gain or loss -
Remeasurement gain / loss on fair value of Equity investment -
Deferred tax liability/asset on on fair value of Equity investment -
-
Total comprehensive income for the period 197,111
Basic and Diluted earnings per share (Birr) 19 0.04
The notes on pages 31 to 86 are an integral part of these 昀椀nancial statements.
STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2022
30 June 2022
Notes Birr’000
ASSETS
Cash and balances with banks 11 5,919,179
Investment securities:
Equity Share Investement 12 10,222
Other assets 13 87,750
Intangible assets 14 58,963
Property, plant and equipment 15 477,484
Right of use asset 16 519,642
Total assets 7,073,240
LIABILITIES
Deposits from customers 17 401,097
Current tax liabilities 10,c 18,478
Other liabilities 18 1,603,537
Deferred tax liabilities 10,e 21,375
Total liabilities 2,044,487
EQUITY
Share capital 19 4,831,642
Retained earnings 20 147,833
Legal reserve 21 49,278
Total equity 5,028,753
Total equity and liabilities 7,073,240
The 昀椀nancial statements on pages 27 to 30 were approved and authorised for issue by the board
of directors on October 26/ 2022 and were signed on its behalf by:
Melaku Fenta Henock Kebede

Board Chairperson Chief Excutive Of昀椀cer
STATEMENT OF CHANGES IN EQUITY
Share Regulatory
Retained Other Legal Special
capital risk Total
earnings reserves reserve reserve
reserve
Notes Birr’000 Birr’000 Birr’000 Birr’000 Birr’000 Birr’000 Birr’000
As at 11 Feberuary 2021 4,825,764 - - - - - 4,825,764
Pro昀椀t for the period 197,111 197,111

Contribution of equity 5,878 5,878
Transfer to legal reserve 21 (49,278) 49,278 -
Total comprehensive
5,878 147,833 - 49,278 - - 202,989
income for the period
As at 30 June 2022 4,831,642 147,833 - 49,278 - - 5,028,753
www.amharabank.com.et
29
ANNUAL REPORT 2022
STATEMENT OF CASH FLOWS
30 June 2022
Notes Birr’000
Cash 昀氀ows from operating activities

Cash generated from operations 22 2,170,269
2,170,269
Net cash (out昀氀ow) in昀氀ow from operating activities
Cash 昀氀ows from investing activities

Purchase of investment securities 12 (10,222)
Purchase of intangible assets 14 (62,649)
Purchase of property, plant and equipment 15 (490,219)
Right of use asset 16 (519,642)
(1,082,732)
Net cash (out ow) in昀氀ow from investing activities
Cash 昀氀ows from 昀椀nancing activities

Proceeds from issues of shares 19 4,831,642
4,831,642
Net cash (out昀氀ow) in昀氀ow from 昀椀nancing activities
Net increase (decrease) in cash and cash equivalents 5,919,179
Cash and cash equivalents at the end of the year 11 5,919,179
ANNUAL REPORT 2022

NOTES TO THE FINANCIAL STATEMENTS
1 General information
Amhara Bank SC (“the Bank”) is a private commercial Bank domiciled in Ethiopia. The Bank became
operational on 18 June 2022 in accordance with the provisions of the Commercial code of Ethiopia
of 1243/2021 and the Licensing and Supervision of Banking Business Proclamation No. 84/1994.
The Bank registered address is at:
Amhara Bank Share Company

Kirkos sub-city,Woreda 08,Around Leghar
P O Box 28450 Code 1000
Addis Ababa, Ethiopia
The bank is involved in provision of banking services for all, the grand principle of the bank is
healthy competition over rivalry and mutual growth rather than growing at the expense of others.
2 Summary of signi昀椀cant accounting policies
2.1 Introduction to summary of signi昀椀cant accounting policies
The principal accounting policies applied in the preparation of these 昀椀nancial statements are set
out below. These policies have been consistently applied to all periods presented, unless otherwise
stated.
2.2 Basis of preparation
The 昀椀nancial statements for the period ended 30 June 2022 have been prepared in accordance
with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting
Standards Board (“IASB”). Additional information required by National regulations is included where
appropriate.
The 昀椀nancial statements comprise the statement of pro昀椀t or loss and other comprehensive income,
the statement of 昀椀nancial position, the statement of changes in equity, the statement of cash 昀氀ows
and the notes to the 昀椀nancial statements.
The 昀椀nancial statements have been prepared in accordance with the going concern principle under
the historical cost concept, except for the following;
 available-for-sale 昀椀nancial assets, certain classes of property, plant and equipment and
investment property – measured at fair value
 assets held for sale – measured at fair value less cost of disposal, and
 de昀椀ned bene昀椀t pension plans – plan assets measured at fair value.
All values are rounded to the nearest thousand, except when otherwise indicated. The 昀椀nancial
statements are presented in thousands of Ethiopian Birr (Birr’ 000).
The preparation of 昀椀nancial statements in conformity with IFRS requires the use of certain critical
accounting estimates. It also requires management to exercise its judgment in the process of
applying the Bank’s accounting policies. Changes in assumptions may have a signi昀椀cant impact
on the 昀椀nancial statements in the period the assumptions changed. Management believes that
the underlying assumptions are appropriate and that the Bank’s 昀椀nancial statements therefore
present the 昀椀nancial position and results fairly. The areas involving a higher degree of judgment or
complexity, or areas where assumptions and estimates are signi昀椀cant to the 昀椀nancial statements,
are disclosed in Note 4.
2.2.1 Going concern
The 昀椀nancial statements have been prepared on a going concern basis. The management have no
doubt that the Bank would remain in existence after 12 months.
2.2.2 New standards and amendments to existing standards
The Bank has consistently applied the accounting policies to all periods presented in these 昀椀nancial
statements.
2.3 SIGNIFICANT ACCOUNTING POLICIES
2.3.1 Financial assets and 昀椀nancial liabilities
a. Recognition and initial measurement
The Bank shall initially recognize loans and advances, deposits, debt securities issued and
subordinated liabilities on the date on which they are originated. All other 昀椀nancial instruments
(including regular-way purchases and sales of 昀椀nancial assets) shall be recognised on the trade
date, which is the date on which the Bank becomes a party to the contractual provisions of the
instrument.
ANNUAL REPORT 2022

A 昀椀nancial asset or 昀椀nancial liability shall be measured initially at fair value plus, for an item not
at fair value through pro昀椀t or loss (FVTPL), transaction costs that are directly attributable to its
acquisition or issue.
b. Classi昀椀cation and subsequent measurement
i) Financial assets
On initial recognition, a 昀椀nancial asset shall be classi昀椀ed either as measured at either amortized
cost, fair value through other comprehensive income (FVOCI) or fair value through pro昀椀t or loss
(FVTPL).
The Bank shall measure a 昀椀nancial asset at amortized cost if it meets both of the following conditions
and is not designated at FVTPL:
— The asset is held within a business model whose objective is to hold assets to collect
contractual cash 昀氀ows; and
— The contractual terms of the 昀椀nancial asset give rise on speci昀椀ed dates to cash 昀氀ows that are
solely payments of principal and interest (SPPI). `
A debt instrument shall be measured at FVOCI only if it meets both of the following conditions and
is not designated at FVTPL:
— The asset is held within a business model whose objective is achieved by both collecting
contractual cash 昀氀ows and selling 昀椀nancial assets; and
— The contractual terms of the 昀椀nancial asset give rise on speci昀椀ed dates to cash 昀氀ows that are
SPPI.
On initial recognition, an equity investment that is held for trading shall be classi昀椀ed at FVTPL.
However, for equity investment that is not held for trading, the Bank may irrevocably elect to present
subsequent changes in fair value in other comprehensive income (OCI). This election is made on
an investment-by-investment basis.
All other 昀椀nancial assets that do not meet the classi昀椀cation criteria at amortized cost or FVOCI,
above, shall be classi昀椀ed as measured at FVTPL.
In addition, on initial recognition, the Bank may irrevocably designate a 昀椀nancial asset that otherwise
meets the requirements to be measured at amortized cost or at FVOCI as at FVTPL if doing so
eliminates or signi昀椀cantly reduces an accounting mismatch that would otherwise arise.
Business model assessment
The Bank shall make an assessment of the objective of a business model in which an asset is held
at a portfolio level because this best re昀氀ects the way the business is managed and information is
provided to management. The information considered includes:
— the stated policies and objectives for the portfolio and the operation of those policies in
practice. In particular, whether management’s strategy focuses on earning contractual
interest revenue, maintaining a particular interest rate pro昀椀le, matching the duration of the
昀椀nancial assets to the duration of the liabilities that are funding those assets or realizing cash
昀氀ows through the sale of the assets;
— how the performance of the portfolio is evaluated and reported to the Bank’s
management;
— the risks that affect the performance of the business model (and the 昀椀nancial assets held
within that business model) and its strategy for how those risks are managed;
— how managers of the business are compensated (e.g. whether compensation is based on the
fair value of the assets managed or the contractual cash 昀氀ows collected); and
— the frequency, volume and timing of sales in prior periods, the reasons for such sales and
its expectations about future sales activity. However, information about sales activity is not
considered in isolation, but as part of an overall assessment of how the Bank’s stated objective
for managing the 昀椀nancial assets is achieved and how cash 昀氀ows are realized.
Financial assets that are held for trading or managed and whose performance is evaluated on a fair
value basis shall be measured at FVTPL because they are neither held to collect contractual cash
昀氀ows nor held both to collect contractual cash 昀氀ows and to sell 昀椀nancial assets.
Financial assets shall not be reclassi昀椀ed subsequent to their initial recognition, except in the period
after the Bank changes its business model for managing 昀椀nancial assets.
— Assessment of whether contractual cash 昀氀ows are solely payments of principal and interest
For the purposes of this assessment, ‘principal’ shall be de昀椀ned as the fair value of the 昀椀nancial
asset on initial recognition. ‘Interest’ shall be de昀椀ned as the consideration for the time value of
money and for the credit risk associated with the principal amount outstanding during a particular
period of time and for other basic lending risks and costs (e.g. liquidity risk and administrative costs),
as well as pro昀椀t margin.
ANNUAL REPORT 2022

In assessing whether the contractual cash 昀氀ows are SPPI, the Bank considers the contractual terms
of the instrument. This includes assessing whether the 昀椀nancial asset contains a contractual term
that could change the timing or amount of contractual cash 昀氀ows such that it would not meet this
condition. In making the assessment, the Bank considers:
— contingent events that would change the amount and timing of cash 昀氀ows;
— leverage features;
— prepayment and extension terms;
— terms that limit the Bank’s claim to cash 昀氀ows from speci昀椀ed assets (e.g. non-recourse loans);
and
— Features that modify consideration of the time value of money (e.g. periodical reset of interest
rates).
ii) Financial liabilities
The Bank shall classify its 昀椀nancial liabilities, other than 昀椀nancial guarantees and loan commitments,
as measured at amortized cost or FVTPL.
A 昀椀nancial guarantee is an undertaking/commitment that requires the issuer to make speci昀椀ed

payments to reimburse the holder for a loss it incurs because a speci昀椀ed party fails to meet its
obligation when due in accordance with the contractual terms.
Financial guarantees issued by the Bank are initially measured at their fair values and, if not
designated as at FVTPL, are subsequently measured at the higher of: the amount of the obligation
under the guarantee, as determined in accordance with IAS 37 Provisions, Contingent Liabilities
and Contingent Assets; and the amount initially recognised less, where appropriate, cumulative
amortization recognized in accordance with the revenue recognition policies.
c. Impairment
At each reporting date, the Bank shall assess whether there is objective evidence that 昀椀nancial
assets (except equity investments), other than those carried at FVTPL, are impaired.
The Bank shall recognize loss allowances for expected credit losses (ECL) on the following 昀椀nancial
instruments that are not measured at FVTPL:
— 昀椀nancial assets that are debt instruments;
— lease receivables;
— 昀椀nancial guarantee contracts issued; and
— Loan commitments issued.
No impairment loss shall be recognised on equity investments.
The Bank shall measure loss allowances at an amount equal to lifetime ECL, except for the following,
which are measured as 12-month ECL:
— debt investment securities that are determined to have low credit risk at the reporting date;
and
— Other 昀椀nancial instruments (other than lease receivables) on which credit risk has not
increased signi昀椀cantly since their initial recognition.
Loss allowances for lease receivables shall always be measured at an amount equal to lifetime
ECL.
12-month ECL is the portion of ECL that result from default events on a 昀椀nancial instrument that are
possible within the 12 months after the reporting date. Financial instruments for which a 12-month
ECL is recognised are referred to as ‘Stage 1 昀椀nancial instruments’.
Life-time ECL is the ECL that result from all possible default events over the expected life of the
昀椀nancial instrument. Financial instruments for which a lifetime ECL is recognised but which are not
credit-impaired are referred to as ‘Stage 2 昀椀nancial instruments’.
i) Measurement of ECL
ECL is a probability-weighted estimate of credit losses. It shall be measured as follows:
— for 昀椀nancial assets that are not credit-impaired at the reporting date (stage 1 and 2): as the
present value of all cash shortfalls (i.e. the difference between the cash 昀氀ows due to the Bank
in accordance with the contract and the cash 昀氀ows that the Bank expects to receive);
— For 昀椀nancial assets that are credit-impaired at the reporting date (stage 3): as the difference
between the gross carrying amount and the present value of estimated future cash 昀氀ows;
— for undrawn loan commitments: as the present value of the difference between the contractual
cash 昀氀ows that are due to the Bank if the commitment is drawn down and the cash 昀氀ows that
the Bank expects to receive; and
— For 昀椀nancial guarantee contracts: as the expected payments to reimburse the holder less any
amounts that the Bank expects to recover.
ii) Restructured 昀椀nancial assets
Where the terms of a 昀椀nancial asset are renegotiated or modi昀椀ed or an existing 昀椀nancial asset is
ANNUAL REPORT 2022

replaced with a new one due to 昀椀nancial dif昀椀culties of the borrower, then the Bank shall assess
whether the 昀椀nancial asset should be derecognized and ECL are measured as follows:
— If the expected restructuring will not result in derecognition of the existing asset, then the
expected cash 昀氀ows arising from the modi昀椀ed 昀椀nancial asset are included in calculating the
cash shortfalls from the existing asset
— If the expected restructuring will result in derecognition of the existing asset, then the expected
fair value of the new asset is treated as the 昀椀nal cash 昀氀ow from the existing 昀椀nancial asset at
the time of its derecognition. This amount is included in calculating the cash shortfalls from
the existing 昀椀nancial asset that are discounted from the expected date of derecognition to the
reporting date using the original effective interest rate of the existing 昀椀nancial asset.
iii) Credit-impaired 昀椀nancial assets
At each reporting date, the Bank shall assess whether 昀椀nancial assets carried at amortized cost,
debt 昀椀nancial assets carried at FVOCI, and 昀椀nance lease receivables are credit-impaired (referred
to as ‘Stage 3 昀椀nancial assets’).
A 昀椀nancial asset shall be considered ‘credit-impaired’ when one or more events that have a
detrimental impact on the estimated future cash 昀氀ows of the 昀椀nancial asset have occurred.
Evidence that a 昀椀nancial asset is credit-impaired includes the following observable data:
— signi昀椀cant 昀椀nancial dif昀椀culty of the borrower or issuer;
— a breach of contract such as a default or past due event;
— the restructuring of a loan or advance by the Bank on terms that the Bank would not consider
otherwise;
— it is becoming probable that the borrower will enter bankruptcy or other 昀椀nancial reorganization;
or
— The disappearance of an active market for a security because of 昀椀nancial dif昀椀culties.
A loan that has been renegotiated due to a deterioration in the borrower’s condition shall be
considered to be credit-impair unless there is evidence that the risk of not receiving contractual
cash 昀氀ows has reduced signi昀椀cantly and there are no other indicators of impairment. In addition, a
retail loan that is overdue for 90 days or more shall be considered credit-impaired even when the
regulatory de昀椀nition of default is different.
iv) Presentation of allowance for ECL in the statement of 昀椀nancial position
Loss allowances for ECL shall be presented in the statement of 昀椀nancial position as follows:
— for 昀椀nancial assets measured at amortized cost: as a deduction from the gross carrying
amount of the assets;
— for loan commitments and 昀椀nancial guarantee contracts: generally, as a provision;
— Where a 昀椀nancial instrument includes both a drawn and an undrawn component, and the
Bank cannot identify the ECL on the loan commitment component separately from those on
the drawn component: the Bank presents a combined loss allowance for both components.
The combined amount is presented as a deduction from the gross carrying amount of the
drawn component. Any excess of the loss allowance over the gross amount of the drawn
component is presented as a provision; and
— For debt instruments measured at FVOCI: no loss allowance is recognised in the statement
of 昀椀nancial position because the carrying amount of these assets is their fair value. However,
the loss allowance shall be disclosed and is recognised in the fair value reserve.
v) Write-off
Loans and debt securities shall be written off (either partially or in full) when there is no reasonable
expectation of recovering the amount in its entirety or a portion thereof. This is generally the case
when the Bank determines that the borrower does not have assets or sources of income that could
generate suf昀椀cient cash 昀氀ows to repay the amounts subject to the write-off. This assessment shall
be carried out at the individual asset level.
Recoveries of amounts previously written off shall be included in ‘impairment losses on 昀椀nancial
instruments’ in the statement of pro昀椀t or loss and OCI.
Financial assets that are written off could still be subject to enforcement activities in order to comply
with the Bank’s procedures for recovery of amounts due.
vi) Non-integral 昀椀nancial guarantee contracts
The Bank shall assess whether a 昀椀nancial guarantee contract held is an integral element of a
昀椀nancial asset that is accounted for as a component of that instrument or is a contract that is
accounted for separately.
ANNUAL REPORT 2022

Where the Bank determines that the guarantee is an integral element of the 昀椀nancial asset, then any
premium payable in connection with the initial recognition of the 昀椀nancial asset shall be treated as a
transaction cost of acquiring it. The Bank shall consider the effect of the protection when measuring
the fair value of the debt instrument and when measuring ECL.
Where the Bank determines that the guarantee is not an integral element of the debt instrument,
then it shall recognize an asset representing any prepayment of guarantee premium and a right to
compensation for credit losses.
d. Derecognition
i) Financial assets
The Bank shall derecognize a 昀椀nancial asset when:
— The contractual right to the cash 昀氀ows from the 昀椀nancial asset expires (see also (1.4)), or
— It transfers the rights to receive the contractual cash 昀氀ows in a transaction in which substantially
all of the risks and rewards of ownership of the 昀椀nancial asset are transferred; or
— Bank neither transfers nor retains substantially all of the risks and rewards of ownership and
it does not retain control of the 昀椀nancial asset.
On derecognition of a 昀椀nancial asset, the difference between the carrying amount of the asset
(or the carrying amount allocated to the portion of the asset derecognized) and the sum of (i) the
consideration received (including any new asset obtained less any new liability assumed) and (ii)
any cumulative gain or loss that had been recognised in OCI shall be recognised in pro昀椀t or loss.
Any cumulative gain/loss recognised in OCI in respect of equity investment securities designated as
at FVOCI shall not be recognised in pro昀椀t or loss on derecognition of such securities.
Any interest in transferred 昀椀nancial assets that qualify for derecognition that is created or retained
by the Bank shall be recognised as a separate asset or liability.
The Bank shall derecognize a 昀椀nancial liability when its contractual obligations are discharged or
cancelled, or expire.
e. Modi昀椀cations of 昀椀nancial assets and 昀椀nancial liabilities
i) Financial assets
If the terms of a 昀椀nancial asset are modi昀椀ed, then the Bank shall evaluate whether the cash 昀氀ows
of the modi昀椀ed asset are substantially different.
If the cash 昀氀ows are substantially different, then the contractual rights to cash 昀氀ows from the original
昀椀nancial asset shall be deemed to have expired. In this case, the original 昀椀nancial asset shall be
derecognized and a new 昀椀nancial asset shall be recognised at fair value plus any eligible transaction
costs. Any fees received as part of the modi昀椀cation shall be accounted for as follows:
— Fees that are considered in determining the fair value of the new asset and fees that represent
reimbursement of eligible transaction costs shall be included in the initial measurement of the
asset; and
— Other fees are included in pro昀椀t or loss as part of the gain or loss on derecognition.
If cash 昀氀ows are modi昀椀ed when the borrower is in 昀椀nancial dif昀椀culties, then the objective of the
modi昀椀cation is usually to maximize recovery of the original contractual terms rather than to originate
a new asset with substantially different terms.
If the Bank plans to modify a 昀椀nancial asset in a way that would result in forgiveness of cash 昀氀ows,
then it shall 昀椀rst consider whether a portion of the asset should be written off before the modi昀椀cation
takes place.
Where the modi昀椀cation of a 昀椀nancial asset measured at amortized cost or FVOCI does not result in
derecognition of the 昀椀nancial asset, then the Bank shall 昀椀rst recalculate the gross carrying amount of
the 昀椀nancial asset using the original effective interest rate of the asset and recognizes the resulting
adjustment as a modi昀椀cation gain or loss in pro昀椀t or loss. Any costs or fees incurred and fees
received as part of the modi昀椀cation adjust the gross carrying amount of the modi昀椀ed 昀椀nancial asset
and shall be amortized over the remaining term of the modi昀椀ed 昀椀nancial asset.
Where such a modi昀椀cation is carried out because of 昀椀nancial dif昀椀culties of the borrower, then the
gain or loss shall be presented together with impairment losses. In other cases, it shall be presented
as interest income calculated using the effective interest rate method.
The Bank shall derecognize a 昀椀nancial liability when its terms are modi昀椀ed and the cash 昀氀ows of
the modi昀椀ed liability are substantially different. In this case, a new 昀椀nancial liability based on the
ANNUAL REPORT 2022

modi昀椀ed terms shall be recognised at fair value. The difference between the carrying amount of the
昀椀nancial liability derecognized and consideration paid is recognised in pro昀椀t or loss. Consideration
paid shall include non-昀椀nancial assets transferred, if any, and the assumption of liabilities, including
the new modi昀椀ed 昀椀nancial liability.
Where the modi昀椀cation of a 昀椀nancial liability is not accounted for as derecognition, then the
amortized cost of the liability shall be recalculated by discounting the modi昀椀ed cash 昀氀ows at the
original effective interest rate and the resulting gain or loss is recognised in pro昀椀t or loss. Any
costs and fees incurred are recognised as an adjustment to the carrying amount of the liability and
amortized over the remaining term of the modi昀椀ed 昀椀nancial liability by re-computing the effective
interest rate on the instrument.
f. Offsetting
Financial assets and 昀椀nancial liabilities shall be offset and the net amount presented in the statement
of 昀椀nancial position when, and only when, the Bank currently has a legally enforceable right to set
off the amounts and it intends either to settle them on a net basis or to realize the asset and settle
the liability simultaneously.
Income and expenses shall be presented on a net basis only when permitted under IFRS, or for
gains and losses arising from a group of similar transactions such as in the Bank’s trading activity.
g. Designation at fair value through pro昀椀t or loss
i) Financial assets
At initial recognition, the Bank may designate certain 昀椀nancial assets as at FVTPL because this
designation eliminates or signi昀椀cantly reduces an accounting mismatch, which would otherwise
arise.
The Bank shall designate certain 昀椀nancial liabilities as at FVTPL in either of the following
circumstances:
— the liabilities are managed, evaluated and reported internally on a fair value basis; or
— the designation eliminates or signi昀椀cantly reduces an accounting mismatch that would

otherwise arise.
2.3.2 Net interest income
a. Effective interest rate and amortized cost
Interest income and expense are recognised in pro昀椀t or loss using the effective interest method.
The ‘effective interest rate’ is the rate that exactly discounts estimated future cash payments or
receipts through the expected life of the 昀椀nancial instrument to:
— the gross carrying amount of the 昀椀nancial asset; or
— the amortized cost of the 昀椀nancial liability.
When calculating the effective interest rate for 昀椀nancial instruments other than credit-impaired
assets, the Bank estimates future cash 昀氀ows considering all contractual terms of the 昀椀nancial
instrument, but not expected credit losses. For credit-impaired 昀椀nancial assets, a credit-adjusted
effective interest rate is calculated using estimated future cash 昀氀ows including expected credit
losses.
The calculation of the effective interest rate includes transaction costs and fees and points paid or
received that are an integral part of the effective interest rate. Transaction costs include incremental
costs that are directly attributable to the acquisition or issue of a 昀椀nancial asset or 昀椀nancial liability
b. Amortized cost and gross carrying amount
The ‘amortized cost’ of a 昀椀nancial asset or 昀椀nancial liability is the amount at which the 昀椀nancial
asset or 昀椀nancial liability is measured on initial recognition minus the principal repayments, plus or
minus the cumulative amortization using the effective interest method of any difference between
that initial amount and the maturity amount and, for 昀椀nancial assets, adjusted for any expected
credit loss allowance.
The ‘gross carrying amount of a 昀椀nancial asset’ is the amortized cost of a 昀椀nancial asset before
adjusting for any expected credit loss allowance.
C. Calculation of interest income and expense
In calculating interest income and expense, the effective interest rate is applied to the gross carrying
amount of the asset (when the asset is not credit-impaired) or to the amortized cost of the liability.
ANNUAL REPORT 2022

However, for 昀椀nancial assets that have become credit-impaired subsequent to initial recognition,
interest income is calculated by applying the effective interest rate to the amortized cost of the
昀椀nancial asset. If the asset is no longer credit-impaired, then the calculation of interest income
reverts to the gross basis.
For 昀椀nancial assets that were credit-impaired on initial recognition, interest income is calculated by
applying the credit-adjusted effective interest rate to the amortized cost of the asset. The calculation
of interest income does not revert to a gross basis, even if the credit risk of the asset improves.
d. Presentation
Interest income and expense presented in the statement of pro昀椀t or loss and OCI include:
— interest on 昀椀nancial assets and 昀椀nancial liabilities measured at amortized cost calculated on
an effective interest basis;
— interest on debt instruments measured at FVOCI calculated on an effective interest basis;
— the effective portion of fair value changes in qualifying hedging derivatives designated in cash
昀氀ow hedges of variability in interest cash 昀氀ows, in the same period as the hedged cash 昀氀ows
affect interest income/expense; and
— The effective portion of fair value changes in qualifying hedging derivatives designated in fair
value hedges of interest rate risk.
Interest income and expense on all trading assets and liabilities are considered to be incidental to
the Bank’s trading operations and are presented together with all other changes in the fair value of
trading assets and liabilities in net trading income.
Interest income and expense on other 昀椀nancial assets and 昀椀nancial liabilities at FVTPL are presented
in net income from other 昀椀nancial instruments at FVTPL.
2.3.3 Foreign currency translation
a) Functional and presentation currency
Items included in the 昀椀nancial statements are measured using the currency of the primary economic
environment in which the Bank operates (‘the functional currency’). The functional currency and
presentation currency of the Bank is the Ethiopian Birr (Birr).
b) Transactions and balances
“Foreign currency transactions are translated into the functional currency using the exchange
rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting
from the settlement of foreign currency transactions and from the translation at exchange
rates of monetary assets and liabilities denominated in currencies other than the Bank’s
functional currency are recognised in pro昀椀t or loss within other (loss)/income. Monetary items
denominated in foreign currency are translated using the closing rate as at the reporting date.
Changes in the fair value of monetary securities denominated in foreign currency classi昀椀ed
as available for sale are analysed between translation differences resulting from changes
in the amortised cost of the security and other changes in the carrying amount of the security.
Translation differences related to changes in amortised cost are recognised in pro昀椀t or loss,
and other changes in carrying amount are recognised in other comprehensive income.
Translation differences on non-monetary 昀椀nancial assets and liabilities such as equities held at
fair value through pro昀椀t or loss are recognised in pro昀椀t or loss as part of the fair value gain or loss.
Translation differences on non-monetary 昀椀nancial assets measure at fair value, such as equities
classi昀椀ed as available for sale, are included in other comprehensive income.
2.3.4 Recognition of income and expenses
“Revenue is recognised to the extent that it is probable that the economic bene昀椀ts will 昀氀ow to
the Bank and the revenue can be reliably measured, regardless of when the payment is being
made. Revenue is measured at the fair value of the consideration received or receivable,
taking into account contractually de昀椀ned terms of payment and excluding taxes or duty.
The Bank, earns income from interest on loans given for domestic trade and services, building and
construction, manufacturing, agriculture and personal loans. Other incomes includes margins on
letter of credits and performance gaurantees.
2.3.5 Interest and similar income and expense
For all 昀椀nancial instruments measured at amortised cost and interest bearing 昀椀nancial assets
classi昀椀ed as available– for–sale interest income or expense is recorded using the Effective
Interest rate (EIR), which is the rate that exactly discounts estimated future cash payments or
receipts through the expected life of the 昀椀nancial instrument or a shorter period, where appropriate,
to the net carrying amount of the 昀椀nancial asset or 昀椀nancial liability. The calculation takes into
account all contractual terms of the 昀椀nancial instrument (for example, prepayment options)
ANNUAL REPORT 2022

and includes any fees or incremental costs that are directly attributable to the instrument
and are an integral part of the Effective Interest Rate (EIR), but not future credit losses.
The carrying amount of the 昀椀nancial asset or 昀椀nancial liability is adjusted if the Bank
revises its estimates of payments or receipts. The adjusted carrying amount is calculated
based on the original EIR and the change in carrying amount is recorded as ‘Interest and
similar income’ for 昀椀nancial assets and Interest and similar expense for 昀椀nancial liabilities.
Once the recorded value of a 昀椀nancial asset or a group of similar 昀椀nancial assets has been reduced
due to an impairment loss, interest income continues to be recognised using the rate of interest
used to discount the future cash 昀氀ows for the purpose of measuring the impairment loss.
2.3.6 Fees and commission
Fees and commission income and expenses that are integral to the effective interest rate on a
昀椀nancial asset or liability are included in the measurement of the effective interest rate. Other fees
and commission income such as correspondent charges and estimation fees, are recognised as
the related services are performed.
When a loan commitment is not expected to result in the draw-down of a loan, loan commitment fees
are recognised on a straight-line basis over the commitment period. Other fees and commission
expenses relates mainly to transaction and service fees are expensed as the services are
received.
2.3.7 Dividend income
This is recognised when the Bank’s right to receive the payment is established, which is generally
when the shareholders approve and declare the dividend.
2.3.8 Foreign exchange revaluation gains or losses
These are gains and losses arising on settlement and translation of monetary assets and liabilities
denominated in foreign currencies at the functional currency’s spot rate of exchange at the reporting
date. This amount is recognised in the income statement and it is further broken down into realised
and unrealised portion. The monetary assets and liabilities include 昀椀nancial assets within the cash
and bank balances, foreign currencies deposits received and held on behalf of third parties.
2.3.9 Cash and cash equivalents
Cash and cash equivalents comprise balances with less than three months’ maturity from the date
of acquisition, including cash in hand, deposits held at call with Banks and other short-term highly
liquid investments with original maturities of three months or less.For the purposes of the cash 昀氀ow
statement, cash and cash equivalents include cash and restricted balances with National Bank of
Ethiopia.
2.3.10 Property, plant and Equipment
Property, plant and equipment is stated at cost, net of accumulated depreciation and accumulated
impairment losses, if any. Such cost includes the cost of replacing part of the property, plant and
equipment if the recognition criteria are met. When signi昀椀cant parts of property, plant and equipment
are required to be replaced at intervals, the Bank recognises such parts as individual assets with
speci昀椀c useful lives and depreciates them accordingly. All other repair and maintenance costs are
recognised in income statement as incurred.
Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as
appropriate, only when it is probable that future economic bene昀椀ts associated with the item will 昀氀ow
to the group and the cost of the item can be measured reliably. The carrying amount of the replaced
part is derecognised.
Depreciation is calculated using the straight-line method to allocate their cost to their residual
values over their estimated useful lives, as follows:
Asset category Years Residual values

Buildings 50 5% of cost
Computer and Accessories 5 1% of Cost
Motor vehicles 10 5% of cost
Furniture and 昀椀ttings 10 1% of Cost
Other and of昀椀ce equiment- Short lived 5 1% of Cost
Other and of昀椀ce equiment Medium -lived 10 1% of Cost
Other and of昀椀ce equiment -Long lived 25 1% of Cost
Counter and Partision 10 1% of Cost
ATM and POS 10 1% of Cost
“The Bank commences depreciation when the asset is available for use.“
An item of property, plant and equipment and any signi昀椀cant part initially recognised is derecognised
upon disposal or when no future economic bene昀椀ts are expected from its use disposal. Any gain or loss
arising on derecognition of the asset (calculated as the difference between the net disposal proceeds
and the carrying amount of the asset) is included in income statement when the asset is derecognised.
The residual values, useful lives and methods of depreciation of property, plant and equipment are
reviewed at each 昀椀nancial year end and adjusted prospectively, if appropriate.
ANNUAL REPORT 2022

2.3.11 Intangible assets
Intangible assets acquired separately are measured on initial recognition at cost. Following initial
recognition, intangible assets are carried at cost less any accumulated amortisation and accumulated
impairment losses, if any. Internally generated intangibles, excluding capitalised development
costs, are not capitalised and the related expenditure is re昀氀ected in income statement in the period
in which the expenditure is incurred.
The useful lives of intangible assets are assessed to be either 昀椀nite or inde昀椀nite. Intangible assets with
昀椀nite lives are amortised over the useful economic life. The amortisation period and the amortisation
method for an intangible asset with a 昀椀nite useful life are reviewed at least at each 昀椀nancial year-end.
Changes in the expected useful life, or the expected pattern of consumption of future economic bene昀椀ts
embodied in the asset, are accounted for by changing the amortisation period or methodology, as
appropriate, which are then treated as changes in accounting estimates. The amortisation expenses
on intangible assets with 昀椀nite lives is presented as a separate line item in the income statement.
Amortisation is calculated using the straight–line method as below.
Description Years Residual value

Softwares 5 Nil
2.3.12 Non-current assets (or disposal groups) held for sale and discontinued
operations
Non-current assets (or disposal groups) are classi昀椀ed as held for sale if their carrying amount
will be recovered principally through a sale transaction rather than through continuing use and
a sale is considered highly probable. They are measured at the lower of their carrying amount
and fair value less costs to sell, except for assets such as deferred tax assets, assets arising
from employee bene昀椀ts, 昀椀nancial assets and investment property that are carried at fair value and
contractual rights under insurance contracts, which are speci昀椀cally exempt from this requirement.
An impairment loss is recognised for any initial or subsequent write-down of the asset (or disposal
group) to fair value less costs to sell. A gain is recognised for any subsequent increases in fair
value less costs to sell of an asset (or disposal group), but not in excess of any cumulative
impairment loss previously recognised. A gain or loss not previously recognised by the date of
the sale of the non-current asset (or disposal group) is recognised at the date of derecognition.
Non-current assets (including those that are part of a disposal group) are not depreciated or
amortised while they are classi昀椀ed as held for sale. Interest and other expenses attributable
to the liabilities of a disposal group classi昀椀ed as held for sale continue to be recognised.
Non-current assets classi昀椀ed as held for sale and the assets of a disposal group classi昀椀ed as held for
sale are presented separately from the other assets in the balance sheet. The liabilities of a disposal
group classi昀椀ed as held for sale are presented separately from other liabilities in the balance sheet.
A discontinued operation is a component of the entity that has been disposed of or is classi昀椀ed
as held for sale and that represents a separate major line of business or geographical area of
operations, is part of a single co-ordinated plan to dispose of such a line of business or area of
operations, or is a subsidiary acquired exclusively with a view to resale. The results of discontinued
operations are presented separately in the statement of pro昀椀t or loss.
2.3.13 Impairment of non-昀椀nancial assets
The Bank assesses, at each reporting date, whether there is an indication that an asset may be
impaired. If any indication exists, or when annual impairment testing for an asset is required, the
Bank estimates the asset’s recoverable amount. An asset’s recoverable amount is the higher of
an asset’s or cash-generating unit’s (CGU) fair value less costs of disposal and its value in use.
Recoverable amount is determined for an individual asset, unless the asset does not generate
cash in昀氀ows that are largely independent of those from other assets or groups of assets. When
the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered
impaired and is written down to its recoverable amount.
In assessing value in use, the estimated future cash 昀氀ows are discounted to their present value
using a pre-tax discount rate that re昀氀ects current market assessments of the time value of money
and the risks speci昀椀c to the asset. In determining fair value less costs of disposal, recent market
transactions are taken into account. If no such transactions can be identi昀椀ed, an appropriate
valuation model is used. These calculations are corroborated by valuation multiples, quoted share
prices for publicly traded companies or other available fair value indicators.
The Bank bases its impairment calculation on detailed budgets and forecast calculations, which
are prepared separately for each of the Bank’s CGUs to which the individual assets are allocated.
These budgets and forecast calculations generally cover a period of 昀椀ve years. For longer periods,
a long-term growth rate is calculated and applied to project future cash 昀氀ows after the 昀椀fth year.
For assets excluding goodwill, an assessment is made at each reporting date to determine whether
there is an indication that previously recognised impairment losses no longer exist or have decreased.
If such indication exists, the Bank estimates the asset’s or CGU’s recoverable amount. A previously
recognised impairment loss is reversed only if there has been a change in the assumptions used
to determine the asset’s recoverable amount since the last impairment loss was recognised. The
reversal is limited so that the carrying amount of the asset does not exceed its recoverable amount,
nor exceed the carrying amount that would have been determined, net of depreciation, had no
impairment loss been recognised for the asset in prior years. Such reversal is recognised in the
income statement.
ANNUAL REPORT 2022

2.3.14 Other assets
Other assets are generally de昀椀ned as claims held against other entities for the future receipt of
money. The other assets in the Bank’s 昀椀nancial statements include the following:
(a) Prepayment
Prepayments are payments made in advance for services to be enjoyed in future. The amount is
initially capitalized in the reporting period in which the payment is made and subsequently amortised
over the period in which the service is to be enjoyed.
(b) Other receivables
Other receivables are recognised upon the occurrence of event or transaction as they arise and
cancelled when payment is received.
The Bank’s other receivables are rent receivables and other receivables from debtors.
2.3.15 Fair value measurement
The Bank measures 昀椀nancial instruments classi昀椀ed as available-for-sale at fair value at each
statement of 昀椀nancial position date. Fair value related disclosures for 昀椀nancial instruments and non-
昀椀nancial assets that are measured at fair value or where fair values are disclosed are, summarised
in the following notes:
• Disclosures for valuation methods, signi昀椀cant estimates and assumptions Notes 3 and Note
4.6.1
• Quantitative disclosures of fair value measurement hierarchy Note 4.6.2

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date. The fair value measurement is
based on the presumption that the transaction to sell the asset or transfer the liability takes place
either:
• In the principal market for the asset or liability, or
• In the absence of a principal market, in the most advantageous market for the asset or liability
The principal or the most advantageous market must be accessible to by the Bank.
The fair value of an asset or a liability is measured using the assumptions that market participants would
use when pricing the asset or liability, assuming that market participants act in their economic best interest.
The Bank uses valuation techniques that are appropriate in the circumstances and for which
suf昀椀cient data are available to measure fair value, maximising the use of relevant observable inputs
and minimising the use of unobservable inputs.
All assets and liabilities for which fair value is measured or disclosed in the 昀椀nancial statements are
categorised within the fair value hierarchy, described as follows, based on the lowest level input that
is signi昀椀cant to the fair value measurement as a whole:
• Level 1 — Quoted (unadjusted) market prices in active markets for identical assets or
liabilities.
• Level 2 — Valuation techniques for which the lowest level input that is signi昀椀cant to the fair value
measurement is directly or indirectly observable.
• Level 3 — Valuation techniques for which the lowest level input that is signi昀椀cant to the fair value
measurement is unobservable.
For assets and liabilities that are recognised in the 昀椀nancial statements on a recurring basis, the
Bank determines whether transfers have occurred between Levels in the hierarchy by re-assessing
categorisation (based on the lowest level input that is signi昀椀cant to the fair value measurement as a
whole) at the end of each reporting period.
The Bank’s management determines the policies and procedures for both recurring fair value
measurement, such as available-for-sale 昀椀nancial assets.
2.3.16 Employee bene昀椀ts
The Bank operates various post-employment schemes, including both de昀椀ned bene昀椀t and de昀椀ned
contribution pension plans and post employment bene昀椀ts.
(a) De昀椀ned contribution plan
The Bank operates pension scheme in line with the provisions of Ethiopian pension of private
organisation employees proclamation 715/2011. Funding under the scheme is 7% and 11% by
employees and the Bank respectively; based on the employees’ salary. Employer’s contributions
ANNUAL REPORT 2022

to this scheme are charged to pro昀椀t or loss and other comprehensive income in the period in which
they relate.
(b) De昀椀ned bene昀椀t plan
The liability or asset recognised in the balance sheet in respect of de昀椀ned bene昀椀t pension plans
is the present value of the de昀椀ned bene昀椀t obligation at the end of the reporting period less the fair
value of plan assets. The de昀椀ned bene昀椀t obligation is calculated annually by independent actuaries
using the projected unit credit method.
The liability recognised in the statement of 昀椀nancial position in respect of de昀椀ned bene昀椀t pension
plans is the present value of the de昀椀ned bene昀椀t obligation at the end of the reporting period less the
fair value of plan assets.
The de昀椀ned bene昀椀t obligation is calculated annually by independent actuaries using the
projected unit credit method. The present value of the de昀椀ned bene昀椀t obligation is determined
by discounting the estimated future cash out昀氀ows using interest rates of high-quality
corporate bonds that are denominated in the currency in which the bene昀椀ts will be paid, and
that have terms to maturity approximating to the terms of the related pension obligation.
The current service cost of the de昀椀ned bene昀椀t plan, recognised in the income statement in employee
bene昀椀t expense, except where included in the cost of an asset, re昀氀ects the increase in the de昀椀ned
bene昀椀t obligation resulting from employee service in the current year, bene昀椀t changes curtailments
and settlements.
Past-service costs are recognised immediately in income.
Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions
are charged or credited to equity in other comprehensive income in the period in which they arise.
(c ) Termination bene昀椀ts
Termination bene昀椀ts are payable to executive directors when employment is terminated by the
Bank before the normal retirement date, or whenever an employee accepts voluntary redundancy
in exchange for these bene昀椀ts. The Bank recognises termination bene昀椀ts when it is demonstrably
committed to either: terminating the employment of current employees according to a detailed
formal plan without possibility of withdrawal; or providing termination bene昀椀ts as a result of an offer
made to encourage voluntary redundancy.
(d ) Pro昀椀t-sharing and bonus plans
The Banks recognises a liability and an expense for bonuses based on a formula that takes into
consideration the pro昀椀t attributable to the company’s shareholders after certain adjustments. The
Bank recognises a provision where contractually obliged or where there is a past practice that has
created a constructive obligation.
2.3.17 Provisions
Provisions are recognised when the bank has a present obligation (legal or constructive) as a result of
a past event, it is probable that an out昀氀ow of resources embodying economic bene昀椀ts will be required
to settle the obligation and a reliable estimate can be made of the amount of the obligation. When the
Bank expects some or all of a provision to be reimbursed, for example, under an insurance contract,
the reimbursement is recognised as a separate asset, but only when the reimbursement is virtually
certain. The expense relating to a provision is presented in income statement net of any reimbursement.
If the effect of the time value of money is material, provisions are discounted using a current pre-tax
rate that re昀氀ects, when appropriate, the risks speci昀椀c to the liability. When discounting is used, the
increase in the provision due to the passage of time is recognised as other operating expenses.
2.3.18 Share capital
Incremental costs directly attributable to the issue of new shares or options or to the acquisition of
a business are shown in equity as a deduction, net of tax, from the proceeds.
2.3.19 Legal reserve
The legal reserve which is a statutory reserve to which no less than 25% of the net pro昀椀ts after
taxation shall be transferred each year until such fund is equal to the capital. When the legal reserve
equals the capital of the bank, the amount to be transferred to the legal reserve account shall be
10% of the annual net pro昀椀t.
2.3.20 IFRS 16 - Leases
The standard introduces a single lessee accounting model and requires a lessee to recognise
assets and liabilities for all leases with a term of more than 12 months, unless the underlying asset
is of low value. A lessee is required to recognise a right-of-use asset representing its right to use
the underlying leased asset and a lease liability representing its obligation to make lease payments.
The adoption of IFRS 16 requires the Bank to make a number of assumptions, estimations and
judgments that includes:
ANNUAL REPORT 2022

_ lease liabilities were determined based on the value of the remaining lease payments,
discounted by an appropriate incremental borrowing rate.
_ term of each arrengment was based on the original lease term.
_ The discount rate used to determine lease liabilities was the Bank’s incremental borrowing
rate. It was calculated based on observable inputs.
At the commencement date, the Bank recognized:
all leases as right right-of-use-asset at cost. Cost of right-of-use asset includes the amount of lease
liability, lease payments made at or before the commencement date (less any lease incentives
received), any initial direct costs incurred and an estimate of costs to be incurred by the Bank in
dismantling and removing the underlying asset, restoring the site on which it is located or restoring
the underlying asset to the condition required by the terms and conditions of the lease, unless those
costs are incurred to produce inventories.
a lease liability at the present value of the lease payments that are not paid at that date. Present
value of lease payments will be determined by discounting future lease payments at the interest rate
implicit in the lease arrangement, if it is readily determined or at Bank’s incremental borrowing rate.
After the commencement date, the Bank masures:
right-of-use assets using cost model, i.e. cost at initial recognition less accumulated depreciation
(in line with IAS 16: Property, plant and Equipment) and accumulated impairment losses (in line with
IAS 36: Impairment of Assets).
_ lease liability by increasing its carrying amount to re昀氀ect interest on the lease liability and by
reducing its carrying amount to re昀氀ect lease payments made.
_ Interest incurred on lease liability will be recognized in the statement of pro昀椀t and loss as a
昀椀nance cost.
Determination of whether an arrangement is a lease, or contains a lease
The determination of whether an arrangement is a lease, or contains a lease, is based on the

substance of the arrangement and requires an assessment of whether the ful昀椀lment of the
arrangement is dependent on the use of a speci昀椀c asset or assets or whether the arrangement
conveys a right to use the asset.
Bank as a lessor
Leases where the Bank does not transfer substantially all of the risk and bene昀椀ts of ownership of
the asset are classi昀椀ed as operating leases. Rental income is recorded as earned based on the
contractual terms of the lease in Other operating income. Initial direct costs incurred in negotiating
operating leases are added to the carrying amount of the leased asset and recognised over the
lease term on the same basis as rental income. Contingent rents are recognised as revenue in the
period in which they are earned.
2.3.21 Income taxation
a) Current income tax
The income tax expense or credit for the period is the tax payable on the current period’s taxable
income based on the applicable income tax rate for each jurisdiction adjusted by changes in deferred
tax assets and liabilities attributable to temporary differences and to unused tax losses.
The current income tax charge is calculated on the basis of the tax laws enacted or substantively
enacted at the end of the reporting period in Ethiopia. Management periodically evaluates positions
taken in tax returns with respect to situations in which applicable tax regulation is subject to
interpretation. It establishes provisions where appropriate on the basis of amounts expected to be
paid to the tax authorities.
b) Deferred tax
Deferred tax is recognised on temporary differences arising between the tax bases of assets and
liabilities and their carrying amounts in the 昀椀nancial statements. However, deferred tax liabilities
are not recognised if they arise from the initial recognition of goodwill; deferred tax is not accounted
for if it arises from initial recognition of an asset or liability in a transaction other than a business
combination that at the time of the transaction affects neither accounting nor taxable pro昀椀t or loss.
Deferred tax is determined using tax rates (and laws) that have been enacted or substantively
enacted by the balance sheet date and are expected to apply when the related deferred tax asset is
realised or the deferred tax liability is settled. Deferred tax assets are recognised only to the extent
that it is probable that future taxable pro昀椀t will be available against which the temporary differences
can be utilised.
ANNUAL REPORT 2022

Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset
current tax assets against current tax liabilities and when the deferred taxes assets and liabilities
relate to income taxes levied by the same taxation authority on either the same taxable entity
or different taxable entities where there is an intention to settle the balances on a net basis.
Deferred tax assets and liabilities are only offset when they arise in the same tax reporting group
and where there is both the legal right and the intention to settle on a net basis or to realise the asset
and settle the liability simultaneously.
2.3.22 Signi昀椀cant accounting estimates and assumptions
The preparation of the Bank’s 昀椀nancial statements requires management to make judgements,
estimates and assumptions that affect the reported amount of revenues, expenses, assets and
liabilities, and the accompanying disclosures, as well as the disclosure of contingent liabilities.
Uncertainty about these assumptions and estimates could result in outcomes that require a material
adjustment to the carrying amount of assets or liabilities affected in future periods.
Other disclosures relating to the Bank’s exposure to risks and uncertainties includes:
• Capital management Note 4.5
• Financial risk management and policies Note 4.1
• Sensitivity analyses disclosures Note 4.2.7
a) Estimates and assumptions
The key assumptions concerning the future and other key sources of estimation at the reporting
date, that have a signi昀椀cant risk of causing a material adjustment to the carrying amounts of assets
and liabilities within the next 昀椀nancial year, are described below. The Bank based its assumptions
and estimates on parameters available when the 昀椀nancial statements were prepared. Existing
circumstances and assumptions about future developments, however, may change due to market
changes or circumstances beyond the control of the Bank. Such changes are re昀氀ected in the
assumptions when they occur.
b) Impairment losses on loans and receivables
Regarding impairment of 昀椀nancial instruments the bank needs to do the detail presented in Note
2.3.1 of this 昀椀nancial statement.
2.3.23 Fair value measurement of 昀椀nancial instruments
When the fair values of 昀椀nancial assets and 昀椀nancial liabilities recorded in the statement of 昀椀nancial
position cannot be measured based on quoted prices in active markets, their fair value is measured
using valuation techniques including the discounted cash 昀氀ow (DCF) model. The inputs to these
models are taken from observable markets where possible, but where this is not feasible, a degree
of judgement is required in establishing fair values. Judgements include considerations of inputs
such as liquidity risk, credit risk and volatility. Changes in assumptions about these factors could
affect the reported fair value of 昀椀nancial instruments. See Note 4.6 for further disclosures.
2.3.24 Depreciation and carrying value of property, plant and equipment
The estimation of the useful lives of assets is based on management’s judgement. Any material
adjustment to the estimated useful lives of items of property and equipment will have an impact on
the carrying value of these items.
2.3.25 Impairment of non-昀椀nancial assets
Impairment exists when the carrying value of an asset or cash generating unit exceeds its recoverable
amount, which is the higher of its fair value less costs of disposal and its value in use. The fair
value less costs of disposal calculation is based on available data from binding sales transactions,
conducted at arm’s length, for similar assets or observable market prices less incremental costs
for disposing of the asset. The value in use calculation is based on a DCF model. The cash 昀氀ows
are derived from the budget for the next 昀椀ve years and do not include restructuring activities that
the Bank is not yet committed to or signi昀椀cant future investments that will enhance the asset’s
performance of the CGU being tested. The recoverable amount is sensitive to the discount rate
used for the discounted cash 昀氀ow model as well as the expected future cash-in昀氀ows and the growth
rate used for extrapolation purposes.
In assessing whether there is any indication that an asset may be impaired, the Bank considers the
following indications:
(i) External information
there are observable indications that the asset’s value has declined during the period signi昀椀cantly
more than would be expected as a result of the passage of time or normal use.
ANNUAL REPORT 2022

• signi昀椀cant changes with an adverse effect on the Bank have taken place during the period, or
will take place in the near future, in the technological, market, economic or legal environment in
which the Bank operates or in the market to which an asset is dedicated.
• market interest rates or other market rates of return on investments have increased during the
period, and those increases are likely to affect the discount rate used in calculating an asset’s
value in use and decrease the asset’s recoverable amount materially.
(ii) Internal information
• evidence is available of obsolescence or physical damage of an asset.
• signi昀椀cant changes with an adverse effect on the Bank have taken place during the period, or
are expected to take place in the near future, in the extent to which, or manner in which, an
asset is used or is expected to be used. These changes include the asset becoming idle, plans
to discontinue or restructure the operation to which an asset belongs, plans to dispose of an
asset before the previously expected date, and reassessing the useful life of an asset as 昀椀nite
rather than inde昀椀nite.
• evidence is available from internal reporting that indicates that the economic performance of an
asset is, or will be, worse than expected.
2.3.26 Taxes
Uncertainties exist with respect to the interpretation of complex tax regulations, changes in tax
laws, and the amount and timing of future taxable income. Given the wide range of international
business relationships and the long-term nature and complexity of existing contractual agreements,
differences arising between the actual results and the assumptions made, or future changes to such
assumptions, could necessitate future adjustments to tax income and expense already recorded.
The amount of such provisions is based on various factors, such as experience of previous tax
audits and differing interpretations of tax regulations by the taxable entity and the responsible tax
authority.
Deferred tax assets are recognised for unused tax losses to the extent that it is probable that taxable
pro昀椀t will be available against which the losses can be utilised. Signi昀椀cant management judgement
is required to determine the amount of deferred tax assets that can be recognised, based upon the
likely timing and the level of future taxable pro昀椀ts together with future tax planning strategies.
4 Financial risk management
4.1 Introduction
Risk is inherent in the Bank’s activities, but is managed through a process of ongoing identi昀椀cation,
measurement and monitoring, subject to risk limits and other controls. This process of risk
management is critical to the Bank’s continuing pro昀椀tability and each individual within the Bank is
accountable for the risk exposures relating to his or her responsibilities. The Bank is exposed to
credit risk, liquidity risk and market risk. It is also subject to country risk and various operating risks.
The independent risk control process does not include business risks such as changes in the
environment, technology and industry. The Bank’s policy is to monitor those business risks through
the Bank’s strategic planning process.
4.1.1 Risk management structure
The Board of Directors has overall responsibility for the establishment and oversight of the Bank’s
risk management framework.
The Board has established the Loan Review and Risk sub-Committee, which are responsible for
developing and monitoring Bank’s risk management policies.
The Bank’s risk management policies are established to identify and analyze the risks faced by the
Bank, to set appropriate risk limits and controls, and to monitor risks and adherence to limits.
Risk management policies and systems are reviewed regularly to re昀氀ect changes in the regulation,
market conditions, products and services offered. The Bank, through its training and procedures
and policies for management, aims to develop a constructive control environment, in which all
employees understand their roles and obligations.
The Bank’s Board of Directors is responsible for monitoring compliance with the Bank’s risk
management policies and procedures, and for reviewing the adequacy of the risk management
framework in relation to the risks faced by the Bank. The Bank’s Board of Directors is assisted in
these functions by the Risk and Compliance Department.
The Risk and Compliance Department undertakes both regular and ad-hoc reviews of risk
management controls and procedures, the results of which are reported to the Risk sub Committee.
ANNUAL REPORT 2022

4.1.2 Risk measurement and reporting systems
The Bank’s risks are measured using a method that re昀氀ects both the expected loss likely to arise
in normal circumstances and unexpected losses, which are an estimate of the ultimate actual loss
based on statistical models. The models make use of probabilities derived from historical experience,
adjusted to re昀氀ect the economic environment. The Bank also runs worst-case scenarios that would
arise in the event that extreme events which are unlikely to occur do, in fact, occur.
Monitoring and controlling risks is primarily performed based on limits established by the Bank.
These limits re昀氀ect the business strategy and market environment of the Bank as well as the level of
risk that the Bank is willing to accept, with additional emphasis on selected regions. In addition, the
Bank’s policy is to measure and monitor the overall risk bearing capacity in relation to the aggregate
risk exposure across all risk types and activities.
4.1.3 Risk mitigation
Risk controls and mitigants, identi昀椀ed and approved for the Bank, are documented for existing and
new processes and systems.The adequacy of these mitigants is tested on a periodic basis through
administration of control self-assessment questionnaires, using an operational risk management
tool which requires risk owners to con昀椀rm the effectiveness of established controls. These are
subsequently audited as part of the review process.
4.2 Credit risk
Credit risk is the risk of 昀椀nancial loss to the Bank if a customer or counterparty to a 昀椀nancial
instrument fails to meet its contractual obligations, and arises principally from the Bank’s loans and
advances to customers and other banks and other 昀椀nancial assets.
Exposure to credit risk is managed through periodic analysis of the ability of borrowers and potential
borrowers to determine their capacity to meet principal and interest thereon, and restructuring
such limits as appropriate. Exposure to credit risk is also mitigated, in part, by obtaining collateral,
commercial and personal guarantees.
The Bank structures the levels of credit risk it undertakes by placing limits on the amount of risk
accepted in relation to one borrower, or groups of borrowers, and to term of the 昀椀nancial instrument
and economic sectors.
The National Bank of Ethiopia (NBE) sets credit risk limit for a single borrower, one related party
and all related parties to not exceed 25% and 35% of Bank’s total capital amount as of the reporting
quarterly period respectively.
Credit management is conducted as per the risk management policy and guideline approved by
the board of directors and the Risk Management Committees. Such policies are reviewed and
modi昀椀ed periodically based on changes and expectations of the markets where the Bank operates,
regulations, and other factors.
4.2.3 Investment securities designated as at FVTPL
i) At 30 June 2022, the Bank had no exposure to credit risk of the investment securities
designated as at FVTPL
4.2.4 Amounts arising from ECL
i) Inputs, assumptions and techniques used for estimating impairment
See accounting policy in Note 2.3.15
ii) Signi昀椀cant increase in credit risk
When determining whether the risk of default on a 昀椀nancial instrument has increased signi昀椀cantly
since initial recognition, the Bank considers reasonable and supportable information that is relevant
and available without undue cost or effort. This includes both quantitative and qualitative information
and analysis, based on the Bank’s historical experience and expert credit assessment and including
forward-looking information.
The objective of the assessment is to identify whether a signi昀椀cant increase in credit risk has
occurred for an exposure by comparing:
— the remaining lifetime probability of default (PD) as at the reporting date; with
— the remaining lifetime PD for this point in time that was estimated at the time of initial recognition
of the exposure (adjusted where relevant for changes in prepayment expectations).
— the Bank uses three criteria for determining whether there has been a signi昀椀cant increase in
credit risk:
— quantitative test based on movement in PD;
— qualitative indicators; and
— a backstop of 30 days past due,
ANNUAL REPORT 2022

iii) Credit risk grades
The Bank allocates each exposure to a credit risk grade based on a variety of data that is determined
to be predictive of the risk of default and applying experienced credit judgement. Credit risk grades
are de昀椀ned using qualitative and quantitative factors that are indicative of risk of default. These
factors vary depending on the nature of the exposure and the type of borrower.
Credit risk grades are de昀椀ned and calibrated such that the risk of default occurring increases
exponentially as the credit risk deteriorates so, for example, the difference in risk of default between
credit risk grades 1 and 2 is smaller than the difference between credit risk grades 2 and 3. Each
exposure is allocated to a credit risk grade on initial recognition based on available information
about the borrower. Exposures are subject to ongoing monitoring, which may result in an exposure
being moved to a different credit risk grade. The monitoring typically involves use of the following
data;
a. Term loan exposures
— Information obtained during periodic review of customer 昀椀les – e.g. audited 昀椀nancial statements,
management accounts, budgets and projections. Examples of areas of particular focus are:
gross pro昀椀t margins, 昀椀nancial leverage ratios, debt service coverage, compliance
— Data from credit reference agencies, press articles, changes in external credit ratings
— Actual and expected signi昀椀cant changes in the political, regulatory and technological environment
of the borrower or in its business activities
— Internally collected data on customer behaviour – e.g. utilisation of credit card facilities
— Affordability metrics
b. Overdraft exposures
— Payment record – this includes overdue status as well as a range of variables about payment
ratios
— Utilisation of the granted limit
— Requests for and granting of forbearance
— Existing and forecast changes in business, 昀椀nancial and economic conditions
i) Generating the term structure of PD
Credit risk grades are a primary input into the determination of the term structure of PD for exposures.
The Bank collects performance and default information about its credit risk exposures analysed by
type of product and borrower as well as by credit risk grading. The Bank employs statistical models
to analyse the data collected and generate estimates of the remaining lifetime PD of exposures and
how these are expected to change as a result of the passage of time.
ii) Determining whether credit risk has increased signi昀椀cantly
The Bank assesses whether credit risk has increased signi昀椀cantly since initial recognition at
each reporting date. Determining whether an increase in credit risk is signi昀椀cant depends on the
characteristics of the 昀椀nancial instrument and the borrower. What is considered signi昀椀cant differs
for different types of lending.
As a general indicator, credit risk of a particular exposure is deemed to have increased signi昀椀cantly
since initial recognition if, based on the Bank’s quantitative modelling:
The credit risk may also be deemed to have increased signi昀椀cantly since initial recognition based on
qualitative factors linked to the Bank’s credit risk management processes that may not otherwise be
fully re昀氀ected in its quantitative analysis on a timely basis. This will be the case for exposures that
meet certain heightened risk criteria, such as placement on a watch list. Such qualitative factors are
based on its expert judgment and relevant historical experiences.
As a backstop, the Bank considers that a signi昀椀cant increase in credit risk occurs no later than when
an asset is more than 30 days past due. Days past due are determined by counting the number of
days since the earliest elapsed due date in respect of which full payment has not been received.
Due dates are determined without considering any grace period that might be available to the
borrower.
If there is evidence that there is no longer a signi昀椀cant increase in credit risk relative to initial
recognition, then the loss allowance on an instrument returns to being measured as 12-month ECL.
Some qualitative indicators of an increase in credit risk, such as delinquency or forbearance, may
be indicative of an increased risk of default that persists after the indicator itself has ceased to exist.
In these cases, the Bank determines a probation period during which the 昀椀nancial asset is required
to demonstrate good behaviour to provide evidence that its credit risk has declined suf昀椀ciently.
When contractual terms of a loan have been modi昀椀ed, evidence that the criteria for recognising
lifetime ECL are no longer met includes a history of up-to-date payment performance against the
modi昀椀ed contractual terms.
ANNUAL REPORT 2022

The Bank monitors the effectiveness of the criteria used to identify signi昀椀cant increases in credit risk
by regular reviews to con昀椀rm that:
— the criteria are capable of identifying signi昀椀cant increases in credit risk before an exposure is in
default;
— the criteria do not align with the point in time when an asset becomes 30 days past due;
— the average time between the identi昀椀cation of a signi昀椀cant increase in credit risk and default
appears reasonable;
— exposures are not generally transferred directly from 12-month ECL measurement to credit-
impaired; and
— there is no unwarranted volatility in loss allowance from transfers between 12-month PD (Stage
1) and lifetime PD (Stage 2).
iii) De昀椀nition of default
The Bank considers a 昀椀nancial asset to be in default when:
— the borrower is unlikely to pay its credit obligations to the Bank in full, without recourse by the
Bank to actions such as realising security (if any is held);
— the borrower is more than 90 days past due on any material credit obligation to the Bank.
— Overdrafts are considered as being past due once the customer has breached an advised limit
or been advised of a limit smaller than the current amount outstanding; or
— t is becoming probable that the borrower will restructure the asset as a result of bankruptcy due
to the borrower’s inability to pay its credit obligations.
In assessing whether a borrower is in default, the Bank considers indicators that are:
— qualitative: e.g. breaches of covenant;
— quantitative: e.g. overdue status and non-payment on another obligation of the same issuer to
the Bank; and
— based on data developed internally and obtained from external sources.
— Inputs into the assessment of whether a 昀椀nancial instrument is in default and their signi昀椀cance
may vary over time to re昀氀ect changes in circumstances.
The de昀椀nition of default largely aligns with that applied by the Bank for regulatory capital purposes
Incorporation of forward-looking information
The Bank incorporates forward-looking information into both the assessment of whether the credit
risk of an instrument has increased signi昀椀cantly since its initial recognition and the measurement of
ECL.
For each segment, the Bank formulates three economic scenarios: a base case, which is the
median scenario, and two less likely scenarios, one upside and one downside. For each sector,
the base case is aligned with the macroeconomic model’s information value output, a measure
of the predictive power of the model, as well as base macroeconomic projections for identi昀椀ed
macroeconomic variables for each sector. The upside and downside scenarios are based on a
combination of a percentage error factor of each sector model as well as simulated optimistic and
pessimistic macroeconomic projections based on a measure of historical macroeconomic volatilities.
In line with the expected, as well as experienced, Expected Credit Loss forward - looking volatility
arising from the economic impact of the Covid 19 global crisis, the Bank has conducted, and overlaid,
additional scenario analysis on the macroeconomic overlay model. This includes application of
higher probability weights on the downside scenario, lower probability weights on the upside
scenario, as well as stress tests on macroeconomic projections. The Bank continues to monitor the
economic impact of Covid 19 on it’s credit risk pro昀椀le as well as forward - looking Expected Credit
Loss estimates and shall update the same on it’s IFRS 9 forward - looking estimates as and when
signi昀椀cant changes in the overall macroeconomic environment are experienced.
External information considered includes economic data and forecasts published by Business
Monitor International, an external and independent macroeconomic data body. This is in addition to
industry – level, semi – annual NPL trends across statistically comparable sectors.
Periodically, the Bank carries out stress testing of more extreme shocks to calibrate its determination
of the upside and downside representative scenarios. A comprehensive review is performed at
least annually on the design of the scenarios by a panel of experts that advises the Bank’s senior
management.
The Bank has identi昀椀ed and documented key drivers of credit risk and credit losses for each portfolio
of 昀椀nancial instruments and, using an analysis of historical data, has estimated relationships between
macro-economic variables and credit risk and credit losses.
ANNUAL REPORT 2022

4.2.5 Modi昀椀ed 昀椀nancial assets
The contractual terms of a loan may be modi昀椀ed for a number of reasons, including changing
market conditions, customer retention and other factors not related to a current or potential
credit deterioration of the customer. An existing loan whose terms have been modi昀椀ed may be
derecognised and the renegotiated loan recognised as a new loan at fair value in accordance with
the accounting policy set out.
When the terms of a 昀椀nancial asset are modi昀椀ed and the modi昀椀cation does not result in derecognition,
the determination of whether the asset’s credit risk has increased signi昀椀cantly re昀氀ects comparison
of: its remaining lifetime PD at the reporting date based on the modi昀椀ed terms; with the remaining
lifetime PD estimated based on data on initial recognition and the original contractual terms.When
modi昀椀cation results in derecognition, a new loan is recognised and allocated to Stage 1 (assuming
it is not credit-impaired at that time).
The Bank renegotiates loans to customers in 昀椀nancial dif昀椀culties (referred to as ‘forbearance

activities’) to maximise collection opportunities and minimise the risk of default. Under the Bank’s
forbearance policy, loan forbearance is granted on a selective basis if the debtor is currently in
default on its debt or if there is a high risk of default, there is evidence that the debtor made all
reasonable efforts to pay under the original contractual terms and the debtor is expected to be able
to meet the revised terms.
The revised terms usually include extending the maturity, changing the timing of interest payments
and amending the terms of loan covenants. Both retail and corporate loans are subject to the
forbearance policy. The Bank Credit Committee regularly reviews reports on forbearance activities.
For 昀椀nancial assets modi昀椀ed as part of the Bank’s forbearance policy, the estimate of PD re昀氀ects
whether the modi昀椀cation has improved or restored the Bank’s ability to collect interest and principal
and the Bank’s previous experience of similar forbearance action. As part of this process, the
Bank evaluates the borrower’s payment performance against the modi昀椀ed contractual terms and
considers various behavioural indicators.
Generally, forbearance is a qualitative indicator of a signi昀椀cant increase in credit risk and an

expectation of forbearance may constitute evidence that an exposure is credit-impaired. A customer
needs to demonstrate consistently good payment behaviour over a period of time before the
exposure is no longer considered to be credit-impaired/in default or the PD is considered to have
decreased such that the loss allowance reverts to being measured at an amount equal to Stage 1.
4.2.6 Measurement of ECL
The key inputs into the measurement of ECL are the term structure of the following variables:
- probability of default (PD);
- loss given default (LGD); and
- exposure at default (EAD).
ECL for exposures in Stage 1 is calculated by multiplying the 12-month PD by LGD and EAD.
Lifetime ECL is calculated by multiplying the lifetime PD by LGD and EAD.
EAD represents the expected exposure in the event of a default. The Bank derives the EAD from
the current exposure to the counterparty and potential changes to the current amount allowed under
the contract and arising from amortisation. The EAD of a 昀椀nancial asset is its gross carrying amount
at the time of default. For lending commitments, the EADs are potential future amounts that may be
drawn under the contract, which are estimated based on historical observations and forward-looking
forecasts. For 昀椀nancial guarantees, the EAD represents the amount of the guaranteed exposure
when the 昀椀nancial guarantee becomes payable. For some 昀椀nancial assets, EAD is determined by
modelling the range of possible exposure outcomes at various points in time using scenario and
statistical techniques.
As described above, and subject to using a maximum of a 12-month PD for Stage 1 昀椀nancial
assets, the Bank measures ECL considering the risk of default over the maximum contractual period
(including any borrower’s extension options) over which it is exposed to credit risk, even if, for credit
risk management purposes, the Bank considers a longer period.
The maximum contractual period extends to the date at which the Bank has the right to require
repayment of an advance or terminate a loan commitment or guarantee.
However, for overdrafts that include both a loan and an undrawn commitment component, the
Bank measures ECL over a period longer than the maximum contractual period if the Bank’s
contractual ability to demand repayment and cancel the undrawn commitment does not limit the
Bank’s exposure to credit losses to the contractual notice period. These facilities do not have a 昀椀xed
term or repayment structure and are managed on a collective basis. The Bank can cancel them with
immediate effect but this contractual right is not enforced in the normal day-to-day management,
but only when the Bank becomes aware of an increase in credit risk at the facility level. This longer
period is estimated taking into account the credit risk management actions that the Bank expects to
take, and that serve to mitigate ECL. These include a reduction in limits, cancellation of the facility
and/or turning the outstanding balance into a loan with 昀椀xed repayment terms.
ANNUAL REPORT 2022

However, for overdrafts that include both a loan and an undrawn commitment component, the
Bank measures ECL over a period longer than the maximum contractual period if the Bank’s
contractual ability to demand repayment and cancel the undrawn commitment does not limit the
Bank’s exposure to credit losses to the contractual notice period. These facilities do not have a 昀椀xed
term or repayment structure and are managed on a collective basis. The Bank can cancel them with
immediate effect but this contractual right is not enforced in the normal day-to-day management,
but only when the Bank becomes aware of an increase in credit risk at the facility level. This longer
period is estimated taking into account the credit risk management actions that the Bank expects to
take, and that serve to mitigate ECL. These include a reduction in limits, cancellation of the facility
and/or turning the outstanding balance into a loan with 昀椀xed repayment terms.
Where modelling of a parameter is carried out on a collective basis, the 昀椀nancial instruments are
grouped on the basis of shared risk characteristics that include:
- instrument type;
- credit risk grading;
- collateral type;
- LTV ratio for retail mortgages;
- date of initial recognition;
- remaining term to maturity;
- industry; and
- Geographic location of the borrower.
The groupings are subject to regular review to ensure that exposures within a particular group
remain appropriately ‘homogeneous.
4.2.7 Concentrations of credit risk
The Bank monitors concentrations of credit risk by economic sector. An analysis of concentrations
of credit risk from loans and advances, loan commitments, 昀椀nancial guarantees and investment
securities.
4.3 Liquidity risk
Liquidity risk is the risk that the Bank cannot meet its maturing obligations when they become due,
at reasonable cost and in a timely manner. Liquidity risk arises because of the possibility that the
Bank might be unable to meet its payment obligations when they fall due as a result of mismatches
in the timing of the cash 昀氀ows under both normal and stress circumstances. Such scenarios could
occur when funding needed for illiquid asset positions is not available to the Bank on acceptable
terms.
Liquidity risk management in the Bank is solely determined by Asset and Liability Committee,
which bears the overall responsibility for liquidity risk. The main objective of the Bank’s liquidity risk
framework is to maintain suf昀椀cient liquidity in order to ensure that we meet our maturing obligations.
4.3.1 Management of liquidity risk
Cash 昀氀ow forecasting is performed by the 昀椀nance department. The 昀椀nance department monitors
rolling forecasts of liquidity requirements to ensure it has suf昀椀cient cash to meet operational needs.
The Bank has incurred indebtedness in the form of borrowings. The Bank evaluates its ability to
meet its obligations on an ongoing basis. Based on these evaluations, the Bank devises strategies
to manage its liquidity risk.
Prudent liquidity risk management implies that suf昀椀cient cash is maintained and that suf昀椀cient
funding is available o meet its liabilities when due, under both normal and stressed conditions,
without incurring unacceptable losses or risk damage to the Bank’s reputation.
4.3.2 Financing arrangements
The Bank has access to the following undrawn borrowing facilities at the end of the reporting period:
4.3.3 Maturity analysis of 昀椀nancial liabilities
The table below analyses the Bank’s 昀椀nancial liabilities into relevant maturity groupings based on
the remaining period at the statement of 昀椀nancial position date to the contractual maturity date. The
cash 昀氀ows presented are the undiscounted amounts to be settled in future.
0 - 30 31 - 90 91 - 180 181 - 365

Over 1 year
days days days days
30 June 2022 Birr’000 Birr’000 Birr’000 Birr’000 Birr’000
Deposits from customers 50,105 75,205 125,500 100,570 49,717

Other liabilities 66,120 118,069 551,100 628,371 239,876
Total Financial Liabilities 116,225 193,274 676,600 728,941 289,592
ANNUAL REPORT 2022

4.4 Market risk
Market risk is de昀椀ned as the risk of loss risk that the fair value or future cash 昀氀ows of a 昀椀nancial
instrument will 昀氀uctuate because of changes in market risk factors such as interest rates, foreign
exchange rates, equity prices, credit spreads and their volatilities. Market risk can arise in conjunction
with trading and non-trading activities of a 昀椀nancial institutions.
The Bank does not ordinarily engage in trading activities as there are no active markets in Ethiopia.
4.4.1 Management of market risk
The main objective of Market Risk Management is to manage and control market risk exposures
within acceptable parameters, while optimising the return on risk.
4.4.2 Management of market risk
Market risk is monitored by the risk management department on regularly, to identify any adverse
movement in the underlying variables.
(i) Interest rate risk
Interest rate risk is the risk that the value of a 昀椀nancial instrument will be affected by changes
in market interest rates. Borrowings obtained at variable rates give rise to interest rate risk.
The Bank’s exposure to the risk of changes in market interest rates relates primarily to the Bank’s
obligations and 昀椀nancial assets with 昀氀oating interest rates. The Bank is also exposed on 昀椀xed rate
昀椀nancial assets and 昀椀nancial liabilities. The Bank’s investment portfolio is comprised of treasury
bills, Ethiopian government bonds and cash deposits.
The table below sets out information on the exposures to 昀椀xed and variable interest instruments.
Non-interest
30 June 2022 Fixed Floating Total
bearing
Birr’000 Birr’000 Birr’000 Birr’000
Assets
Cash and balances with banks 5,734,751 137,361 47,067 5,919,179
Total 5,734,751 137,361 47,067 5,919,179
Liabilities
Deposits from customers 390,676 - 10,421 401,097
Other liabilities 1,363,661 - 239,876 1,603,537
Total 1,754,336 - 250,297 2,004,634
(ii) Foreign exchange risk
Foreign exchange risk is the risk that the fair value or future cash 昀氀ows of a 昀椀nancial instrument will
昀氀uctuate due to the changes in foreign exchange rates.
The Bank is exposed to exchange rate risks to the extent of balances and transactions denominated
in a currency other than the Ethiopian Birr. The Bank’s foreign currency bank accounts act as a
natural hedge for these transactions. Management has set up a policy to manage the Bank’s
foreign exchange risk against its functional currency.
The table below summarises the impact of increases/decreases of 10% on equity and pro昀椀t or
loss arising from the Bank’s foreign denominated borrowings and cash and bank balances.
The total foreign currency denominated assets and liabilities exposed to risk as at year end is
shown below.
ANNUAL REPORT 2022

Foreign currency denominated balances
30 June 2022
Birr’000
Cash and bank balances 87,712
Deposit from customers -
87,712
Sensitivity analysis for foreign exchange risk
The sensitivity analysis for currency rate risk shows how changes in the fair value or future cash
昀氀ows of a 昀椀nancial instrument will 昀氀uctuate because of changes in market rates at the reporting date.
The sensitivity of the Bank’s earnings to 昀氀uctuations in exchange rates is re昀氀ected by varying the
exchange rates at 10% as shown below:
Carrying amount 10% increase in basis point 10% decrease in basis point
30 June 2022 Birr’000 Birr’000 Birr’000
87,712 8,771 (8,771)
4.5 Capital management
The Bank’s objectives when managing capital are to comply with the capital requirements set by
the National Bank of Ethiopia, safeguard its ability to continue as a going concern, and to maintain a
strong capital base so as to maintain investor, creditor and market con昀椀dence and to sustain future
development of the business.
4.5.1 Capital adequacy ratio
According to the Licensing & Supervision of Banking Business Directive No SBB/50/2011 of the
National Bank of Ethiopia, the Bank has to maintain capital to risk weighted assets ratio of 8% at
all times, the risk weighted assets being calculated as per the provisions of Directive No SBB/9/95
issued on August 18, 1995.
The capital adequacy ratio is the quotient of the capital base of the Bank and the Bank’s risk
weighted asset base. Capital includes capital contribution, retained earnings, legal reserve and
other reserves.
30 June 2022
Birr’000
Capital
Capital contribution 4,831,642
Retained earnings 147,833
Legal reserve 49,278
5,028,753
Risk weighted assets
Risk weighted balance for on-balance sheet items 5,325,648
Credit equivalents for off-balance sheet items 958,923
11,313,324
Risk-weighted Capital Adequacy Ratio (CAR) 44%

Minimum required capital 8%
Excess 36%
4.6 Fair value of 昀椀nancial assets and liabilities
IFRS 13 requires an entity to classify measured or disclosed fair values according to a hierarchy
that re昀氀ects the signi昀椀cance of observable inputs.
All assets and liabilities for which fair value is measured or disclosed in the 昀椀nancial statements
are categorised within the fair value hierarchy, which comprises of three levels as described below,
based on the lowest level input that is signi昀椀cant to the fair value measurement as a whole.
4.6.1. Valuation models
IFRS 13 speci昀椀es a hierarchy of valuation techniques based on whether the inputs to those valuation
techniques are observable or unobservable. Observable input re昀氀ect market data obtained from
independent sources; unobservable inputs re昀氀ect the Bank’s market assumptions.
ANNUAL REPORT 2022

All assets and liabilities for which fair value is measured or disclosed in the 昀椀nancial statements are
categorised within the fair value hierarchy, described as follows, based on the lowest level input that
is signi昀椀cant to the fair value measurement as a whole.
 Level 1: Inputs that are quoted market prices (unadjusted) in active markets for identical assets
or liabilities.
 Level 2: Inputs other than quoted prices included within Level 1 that are observable
for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from
prices) .This category includes instruments valued using: quoted market prices in
active markets for similar instruments; quoted prices for identical or similar instruments
in markets that are considered less than active, or other valuation technique in
which all signi昀椀cant inputs are directly or indirectly observable from market data.
In conclusion, this category is for valuation techniques for which the lowest level input that is
signi昀椀cant to the fair value measurement is directly or indirectly observable.
 Level 3: Inputs for the asset or liability that are not based on observable market data
(unobservable inputs). This category includes all assets and liabilities for which the valuation
technique includes inputs not based on observable date and the unobservable inputs have a
signi昀椀cant effect on the asset or liability’s valuation. This category includes instruments that
are valued based on quoted prices for similar instruments for which signi昀椀cant unobservable
adjustments or assumptions are required to re昀氀ect differences between the instruments.
4.6.2 Financial instruments not measured at fair value - Fair value hierarchy
The following table summarises the carrying amounts of 昀椀nancial assets and liabilities at the reporting
date by the level in the fair value hierarchy into which the fair value measurement is categorised.
The amounts are based on the values recognised in the statement of 昀椀nancial position.
Carrying
Fair value
amount
30 June 2022 Birr’000 Birr’000
Financial assets
Cash and balances with banks 5,919,179 5,919,179
Investment securities 10,222 10,222
Total 5,929,401.19 5,929,401
Financial liabilities
Deposits from customers 401,097 401,097
Other liabilities 1,603,537 1,603,537
Total 2,004,634 2,004,634
The bank Equity investment in Eth-Switch s.c with a cost of 10.22 million have not been measured
for Fair value. Due to non availablity of stock market we can’t measure it with 昀椀rst hand information.
Carrying
Fair value
amount
Cost: Birr’000 Birr’000
Eth-Switch s.c 10,222 10,222
Fair value As at 30 June 2022 10,222 10,222
ANNUAL REPORT 2022

30 June 2022
Birr’000
5 Interest income
Interest on deposits with domestic banks 182,143
182,143
30 June 2022
Birr’000
6 Interest expense
Interest on customer savings 9
Interest expenses - right of use asset 2,049
2,058
30 June 2022
Birr’000
7 Other operating income
Net gain on foreign exchange 22,471
Service charges 325,816
Other income 572
348,860
30 June 2022
Birr’000
8 Personnel expenses
Short term employee bene昀椀ts :
Salaries and wages 70,149
Staff allowances 15,968
Overtime 83
Pension costs – De昀椀ned contribution plan 9,948
Other staff expenses 5,449
101,597
Long term employee bene昀椀ts :
Pension costs - De昀椀ned bene昀椀t plans -
101,597
30 June 2022
Birr’000
9 Other operating expenses
Deprciation expenses - right of use asset 24,621
Of昀椀ce supplies and sundry 22,015
Advertisement and Publicity 92,348
Electricity, telephone and internet 186
Travelling expenses 3,326
Repairs and maintenance 3,649
Event organization expense 9,994
Fuel and lubricants 37
Per diem administration 3,104
Insurance 365
Entertainment 350
Director fees 1,320
Bank charges 1
Subscription and Publication 1,864
Wages for non employees 755
Audit fees 188
Postage and stamps 9
Security and cleaninig expenses 1,309
Car rent 4,595
Stamp duty charge 3,928
173,963
10 Company income and deferred tax

10,a Current income tax
Company income tax 18,478
Prior year (over)/under provision -
Deferred income tax/(credit) to pro昀椀t or loss 21,375
Total charge to pro昀椀t or loss 39,853
ANNUAL REPORT 2022

10,b Reconciliation of effective tax to statutory tax

The tax on the Bank’s pro昀椀t before income tax differs from the theoretical amount that
would arise using the statutory income tax rate as follows:
30 June 2022
Birr’000
Add:Disallowed expenses
Entertainment 350
Deprciation for accounting purpose 12,735
Amortization for accounting purpose 3,686
Accrud leave Expense 3,696
Depreciaion and interest expense IFRS 16 23,159
Total disallowable expenses 43,626
Less: Allowable expenses

Deprciation for tax purpose 9,411
Interest on deposits with domestic banks 182,143
Amortization for tax purpose 4,879
Depreciaion (Of昀椀ce rent) expense for tax purpose 22,564
Total allowable expenses 218,998
Taxable pro昀椀t 61,592

Current tax at 30% 18,478
30 June 2022
10,c Current income tax liability Birr’000
Balance at the beginning of the year -
Current year provision 18,478
WHT Notes utilised -
Payment during the year -
Balance at the end of the year 18,478
10,d Deferred income tax
Deferred income tax assets are recognised only to the extent that it is probable that future
taxable pro昀椀t will be available against which the temporary differences can be utilised.
30 June 2022
Birr’000
The analysis of deferred tax assets/(liabilities) is as follows:
To be recovered after more than 12 months 21,375

To be recovered within 12 months -
21,375
Deferred income tax assets and liabilities, deferred income tax charge/(credit) in pro昀椀t
10,e
or loss (“P/L), in equity and other comprehensive income are attributable to the following
items:
Deferred income tax At 1 July Credit/ Effect of Credit/

assets/(liabilities): 2021 (charge) to opening (charge) to 30 June
P/L balance equity 2022
restatment
Birr’000 Birr’000 Birr’000 Birr’000
Property, plant and

- 21,375 - - 21,375
equipment
Post employment
- - - - -
bene昀椀t obligation
Equity Securities - - - - -
Total deferred tax
- 21,375 - - 21,375
assets/(liabilities)
ANNUAL REPORT 2022

30 June 2022
Birr’000
11 Cash and balances with banks
Cash in hand 137,361

Balance held with National Bank of Ethiopia 47,067
Deposits with local banks 5,734,751
Deposits with foreign banks -
5,919,179
Maturity analysis 30 June 2022

Birr’000
Current 5,919,179
Non-Current -
5,919,179
30 June 2022
Birr’000
12 Investment securities
Fair value through other comprhensive income
Equity Investments 10,222
10,222

Birr’000
Current -
Non-Current 10,222
10,222
The Bank hold equity investments in Eth-switch. These investments are unquoted equity
securities measured at cost.
30 June 2022
Birr’000
13 Other assets
Financial assets
Items in course of collection 551
Uncleared effects 1,619
2,170
Non-昀椀nancial assets
Deposit and Prepayments 278
Sundry receivables 50,035
Inventory and of昀椀ce supplies 35,266
85,580
Less :
Impairment allowance on other assets -
Gross amount 87,750

Birr’000
Current 87,750
Non-Current -
Impairment allowance on other assets
87,750
13,b Inventory
A breakdown of the items included within inventory is as follows:
30 June 2022
Birr’000
Stationary Stock 17,726
Other Stock Items 8,078
Uniform Stock 6,451
Cheque Books 2,389
CPO Stock 622
35,266
ANNUAL REPORT 2022

14 Intangible Assets-Purchased software

30 June 2022
Birr’000
Cost:
As at 30 June 2022
Acquisitions Intangiable Assets 62,649
Reclassi昀椀cations -
62,649
Accumulated amortisation and impairment losses
As at 30 June 2022 -
Amortisation for the year (3,686)
Impairment losses -
(3,686)
Net book value
As at 30 June 2022 58,963
15 Property, plant and equipment

Of昀椀ce Computer
Motor Furniture
and other and Total
vehicles Premises and 昀椀ttings
equipment accessories
Birr’000 Birr’000 Birr’000 Birr’000 Birr’000 Birr’000
Cost:
As at june 30 2022 228,957 - 143,370 55,103 62,788 490,219
Disposals - - - - - -
Reclassi昀椀cation - - - - - -
228,957 - 143,370 55,103 62,788 490,219
Accumulated depreciation
As at june 30 2022
Charge for the year 3,490 4,800 902 3,544 12,735
Disposals - - - - - -
Reclassi昀椀cation - - - - - -
3,490 - 4,800 902 3,544 12,735
Net book value As
225,468 - 138,571 54,201 59,244 477,484
at 30 June 2022
16 The right of use asset

30 June 2022
Birr’000
Cost:
As at 30 June 2022
Acquisitions 540,752
Accumulated deprciation (21,110)
Reclassi昀椀cations -
Net book value as at 30 June 2022 519,642
30 June 2022
Birr’000
17 Deposits from customers
Demand deposits 28,519
Savings deposits 372,578
401,097
30 June 2022
Birr’000
18 Other liabilities
Non-昀椀nancial liabilities
Other payable 77,597
Tax payable 10,676
Interest Tax Payable On Deposit 0.4
VAT Payable 6,579
De昀椀ned contribution liabilities 3,926
Payable to share subscribers 1,252,864
Witholding tax payable 5,161
Leave days accrual 3,696
Stamp duty payables 876
Audit fee 103
Lease Liabilities 242,058
1,603,537
ANNUAL REPORT 2022

18,a Lease Liablity

30 June 2022
Birr’000
Cost:
Lease Liabilities- right of use asset 242,058
-
As at 30 June 2022
242,058
30 June 2022
Birr’000
19 Ordinary share capital
Authorised:
Ordinary shares of Birr 1000 each 6,516,328
Issued and fully paid:
Ordinary shares of Birr 1000 each 4,831,642
Earning per share

Basic earnings per share (EPS) is calculated by dividing the pro昀椀t after taxation by
weighted average number of ordinary shares in issue during the year.
30 June 2022
Birr’000
Pro昀椀t attriutable to shareholders 197,111
Weighted average number of ordinary shares in issue 4,828,703
Basic and diluted earnings per share (Birr) 0.04
30 June 2022
Birr’000
20 Retained earnings
At the beginning of the year -
Pro昀椀t (Loss) for the year 197,111
Transfer to legal reserve (49,278)
At the end of the year 147,833
30 June 2022
Birr’000
21 Legal reserve
At the beginning of the year -

Transfer from pro昀椀t or loss 49,278
At the end of the year 49,278
The NBE Directive No. SBB/4/95 states requires the Bank to transfer annually 25% of its
annual net pro昀椀t to its legal reserve account until such account equals its capital. When
the legal reserve account equals the capital of the Bank, the amount to be transferred to
the legal reserve account will be 10% (ten percent) of the annual net pro昀椀t.
The Regulatory risk reserve is a non-distributable reserves required by the regulations

of the National Bank of Ethiopia(NBE) to be kept for impairment losses on loans and
receivables in excess of IFRS charge as derived using the incurred loss model. Where the
loan loss impairment determined using the National Bank of Ethiopia (NBE) guidelines
is higher than the loan loss impairment determined using the incurred loss model under
IFRS, the difference is transferred to regulatory risk reserve and it is non-distributable to
the owners of the Bank. Where the loan loss impairment determined using the National
Bank of Ethiopia (NBE) guidelines is less than the loan loss impairment determined using
the incurred loss model under IFRS, the difference is transferred from regulatory risk
reserve to the retained earning to the extent of the non-distributable reserve previously
recognised.
30 June 2022
Notes Birr’000
22 Cash generated from operating activities
Adjustments for non-cash items:
Depreciation of property, plant and equipment 14 12,735
Amortisation of intangible assets 15 3,686
- Decrease/ (Increase) in other asset 13 (87,750)
- Decrease/ (Increase) in other liablities 16 1,603,537
- Decrease/ (Increase) in deposits from customer 17 401,097
- Decrease/ (Increase) in remeasurement -
2,170,269
ANNUAL REPORT 2022

23 Related party transactions
A number of transactions were entered into with related parties in the normal course of
business. These are disclosed below:
30 June 2022
Birr’000
23,a Transactions with related parties
Loans disbursed to : -
Key management -
-
24,b Key management compensation
Key management has been determined to be the members of the Board of Directors
and the Executive Management of the Bank. The compensation paid or payable to key
management for is shown. There were no sales or purchase of goods and services
between the Bank and key management personnel as at 30 June 2022.
30 June 2022
Birr’000
Salaries and other short-term employee bene昀椀ts 12,104
Post-employment bene昀椀ts 769
Termination bene昀椀ts -
Sitting allowance (Representation Allowance) 1,117
Other expenses -
13,990
Compensation of the Bank’s key management personnel includes salaries, non-cash

bene昀椀ts and contributions to the post-employment de昀椀ned bene昀椀ts plans.
25 Directors and employees
i) The average number of persons (excluding directors) employed by the Bank during the
year was as follows:
30 June 2022
Birr’000
Professionals and High Level Supervisors 174
Semi-professional, Administrative and Clerical 732
Technician and Skilled 407
1,313
ii) The table below shows the number of employees (excluding directors), who earned over
Birr 10,000 as emoluments in the year and were within the bands stated.
30 June 2022
Birr’000
10,000 - 30,000 762
30,001 - 50,000 92
50,001 - 100,000 72
Above 100,000 11
937
26 Events after reporting period
In the opinion of the Directors, there were no signi昀椀cant post balance sheet events which
could have a material effect on the state of affairs of the Bank as at 30 June 2022 and
on the pro昀椀t for the period ended on that date, which have not been adequately provided
for or disclosed.
የአማራ ባንክ የምረቃ እና
የስራ አጀማመር ፎቶዎች በከፊል
ANNUAL REPORT 2022
የአማራ ባንክ የምረቃ እና የስራ አጀማመር በፎቶ
www.amharabank.com.et
የአማራ ባንክ የምረቃ እና የስራ አጀማመር በፎቶ
የአማራ ባንክ የደም ልገሳ መርሀግብር በፎቶ

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Amhara Bank Annual Report English

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ANNUAL REPORT 2022

Message from Chairperson of the Board of Directors.............................4

Message from The CEO.........................................................................7

Board of Directors’ Report....................................................................12

External Auditors’ Report......................................................................21

Statement of Pro昀椀t or Loss And Other Comprehensive Income...........27

Statement of Financial Position.............................................................28

Statement of Changes in Equity............................................................29

Statement of Cash Flows ................................................................... 30

Notes to the Financial Statements .......................................................31

Designed & Printed by

Dear honorable shareholders, it is my

The year was marked with a great

Over the year, the country has been facing

Along with the aforementioned tasks, the Bank is

I am honored to convey my maiden

Amhara Bank started its operation in the

Finally, I wish to express my sincere gratitude

1. MAJOR PRE-OPERATING WORKS support staff according to the staff

 Gathering and consolidating data of Deposit Mobilization as of June 30,

 Preparing the annual plan for FY 2021/22

2. OPERATIONAL HIGHLIGHTS 372.6 ,

The pro昀椀tability of banks hinges on the Reaching Out Customers

የአማራ ባንክ የምረቃ እና

Report on the Audit of the 昀椀nancial statement

Basis for Opinion

Responsibilities of Directors for the Financial Statements

Auditor’s Responsibilities for the Audit of the Financial Statements

Report on other Legal and Regulatory requirement

Tafesse,Shisema and Ayalew Certi昀椀ed Audit Partnership

Company registration number

AMHARA BANK SHARE COMPANY

Incorporation and address

Results and dividends

a) Exhibit clearly and correctly the state of its affairs;

Signed on behalf of the Directors by:

Melaku Fenta Henok Kebede

AMHARA BANK SHARE COMPANY

Interest income 5 182,143

Other operating income 7 348,860

Personnel expenses 8 (101,597)

Pro昀椀t before tax 236,964

Other comprehensive income (OCI) net on income tax

Items that will not be subsequently reclassi昀椀ed into pro昀椀t or loss:

The notes on pages 31 to 86 are an integral part of these 昀椀nancial statements.

The notes on pages 31 to 86 are an integral part of these 昀椀nancial statements.

Melaku Fenta Henock Kebede

As at 11 Feberuary 2021 4,825,764 - - - - - 4,825,764

Pro昀椀t for the period 197,111 197,111

The notes on pages 31 to 86 are an integral part of these 昀椀nancial statements.

Cash 昀氀ows from operating activities

Cash 昀氀ows from investing activities

Cash 昀氀ows from 昀椀nancing activities

Net increase (decrease) in cash and cash equivalents 5,919,179

Cash and cash equivalents at the end of the year 11 5,919,179

The notes on pages 31 to 86 are an integral part of these 昀椀nancial statements.

AMHARA BANK SHARE COMPANY

Amhara Bank Share Company

2 Summary of signi昀椀cant accounting policies