No Telephone Fax: Branches in Addis Ababa
No Telephone Fax: Branches in Addis Ababa
No Telephone Fax: Branches in Addis Ababa
E-mail: aib.businessdev@ethionet.et
awash.bank@ethionet.et
TABLE OF CONTENTS
Chairman’s Statement…………………………………..…. 1
Bekele Nedi
Chairman
5
Leikun Berhanu Mitiku Abeshu Negasa Tumsa Terefe Mengesha
Director Director V/Chairman Director
Annual Report
Chairman’s Statement
Bekele Nedi On the domestic front the inflationary pressure which prevailed in
Chairman, Board of Directors the earlier years persisted forcing the National Bank of Ethiopia
to raise the statutory reserve and liquidity requirements and set credit ceilings for commercial
banks. These measures stifled the growth of AIB’s volume of loans and advances in a situation
where interest bearing deposits grew sharply. Given the depressed business environment, it is
gratifying to note that the Bank recorded a net profit after tax of Birr 213.8 million, resulting in
earnings per share of Birr 558 on a capital base which has been continuously growing during
the period under review. Total deposits reached Birr 5.3 billion as at 30 June 2009, passing the
Birr 5 billion mark. Outstanding loans and advances stood at Birr 2.6 billion, reflecting a low
50% loan/deposit ratio.
Pursuant to the aggressive branch expansion program during the period under review to bring
banking services closer to potential customers, 13 more branches were opened lifting the total
number of AIB’s branches to 61 making the Bank the leader in branch network among private
banks. The medium and long term benefits of a strong deposit base for AIB is quite obvious. 1
Online banking service is fully implemented in Addis and three outlying branches have become
beneficiaries of the system and implementation is continuing during the 2009/10 financial year.
As part of its modernization effort, a study on the introduction of a card banking system in a
Annual Report
cost-effective manner is underway and we look forward to the implementation of the system to
address the growing demands of the Bank’s customers for the service.
Following the farsighted resolution passed by the shareholders of the Bank at the 9th
Extraordinary General Meeting of Shareholders, AIB’s paid-up capital reached Birr 445.5 million
as at 30 June 2009. We believe that the shareholders’ decision to raise the paid-up capital of
the Bank to Birr 550 million by the end of December 2009 will be met. On behalf of the Board of
Directors and myself, I would like to extend my sincere appreciation to the shareholders of AIB
who have always understood the need for a strong capital base for building the image of
their Bank and its uninterrupted growth and expansion and continuously strengthened
the capital of their Bank.
AIB’s vision is “To be the first chosen bank of the people” which the current and future
generations of Ethiopians will be proud of. Having its own Headquarters building was
envisioned as one step forward towards meeting its objectives. The realization of this
dream is now very close as the construction work of the building is nearing completion to
make AIB the first private bank to own its Headquarters building in Ethiopia. Constructions
of branch buildings are also progressing in Nekemte and Shashemene, while construction
of branch buildings is expected to start in Ghimbi and Adama towns during the 2009/10
financial year. We are sure that the Bank’s drive towards owning its branch buildings will
continue to have the support of its shareholders.
The world of business ahead of us is even more challenging than in the past. Ethiopia’s
financial sector is becoming more and more competitive because of increases in the number
of private banks and modernization of banking services. The need for diversifying sources
of income is being felt more than ever, particularly in an environment where credit ceilings
are set for banks. In addition, enhancement of the quality of loans and advances and
minimization of non-performing loans requires special attention. Giving due attention to the
international banking business by providing support to exports and other foreign exchange
generating activities to the extent possible in order to finance imports required for the
country’s economic growth and development and enhance AIB’s income from international
banking services is also required. All these and other related matters, including control of
controllable expenses, call for taking appropriate actions by a unified team of the Bank’s
Board of Directors, Management and employees and the continued support of the Bank’s
shareholders to ensure the continuity of AIB’s success even in these trying times.
Finally, all the success stories registered would have been impossible without strong
2 cooperation and advice obtained from the visionary shareholders of the Bank, strong
leadership of the Board of Directors, hard work of all management and employees of the
Bank and especially the support of the Bank’s highly esteemed customers. The guidance
of the Supervisory Authority, the National Bank of Ethiopia, and the cooperation of various
offices of the Federal and Regional Governments in AIB’s endeavor towards meeting its
Annual Report
corporate mission and objectives were indispensable. Therefore, on behalf of the Board of
Directors, I am indebted to express my deepest gratitude to all of these stakeholders and I
look forward to their continuing usual cooperation and support in the years ahead. Thank
you.
3 Annual Report
Executive Management
Leikun Berhanu
President
Tsehay Shiferaw
Eshetu Fantaye
Mitiku Abeshu V/P, Corporate Services
V/P, Credit & Risk
V/P, International Banking Management
President’s Statement
Awash International Bank S.C. has successfully
completed eighteen months of operation covering the
period 1 January 2008 to 30 June 2009. The period
under review posed serious challenges both in the
global and the domestic arenas. In the global front
severe global financial and economic crises hit the
global economy. The crises revealed the fast growing
interdependence of the global economy much more
starkly than ever before.
On the domestic front, inflation persisted during the period under review leading to a much more 5
contractionary monetary policy stance than was the case in 2007. Liquidity requirement was
raised, reserve requirement was also raised successively and a credit ceiling was put in place
during the period under review. Therefore, AIB had to grapple with the challenge of keeping
itself within the credit ceiling set by the National Bank of Ethiopia in the face of a sharp growth
of interest bearing deposits.
Annual Report
Deposits reached Birr 5.3 billion as at 30 June 2009 surpassing the Birr 5 billion mark while
outstanding loans and advances stood at a low level of Birr 2.6 billion, reflecting a mere 50%
loan/deposit ratio. Despite its short term cost implications under the tight monetary policy
environment, it should also be borne in mind that a growing level of deposits ensures enhancement
of the Bank’s future income as inflation comes under control and allows the resumption of an
adequate pace of credit growth for Ethiopia’s young private sector.
During the period under review, the accelerated depreciation of the Birr led to higher gains in
foreign exchange dealings than usual. This has partly compensated for low interest earnings
on loans and advances. The Bank’s achievement of net profit after tax of Birr 213.8 million and
earnings per share of Birr 558 was indeed gratifying given the tight business conditions which
prevailed during the period.
Thirteen branches were opened raising the Bank’s total number of branches to 61 and making
AIB the leading private bank in terms of branch network. Although all branches in Addis
Ababa provide on-line banking services to their customers, extending the services to outlying
branches was slow for various reasons requiring appropriate attention during the forthcoming
financial year.
The construction of AIB’s Headquarters building is progressing well and we look forward to its
completion in 2009/10 financial year. Construction of two branch buildings have commenced
and construction of two other branch buildings outside Addis Ababa is planned to start in the
2009/10 financial year. The Bank’s paid-up capital reached Birr 445.5 million at the end of
June, 2009 and we look forward to meeting the target of Birr 550 million by the end of December
2009 as per decision of the Bank’s shareholders. The focus of AIB’s shareholders on building
the capital base of their Bank continues to be indispensable.
Although there is a faint hope of global economic recovery there is not much room for optimism at
this stage. It is also very difficult to predict the pace of recovery of global demand for, and prices
of, exportable goods of developing countries to the developed and emerging market economies.
Meeting these challenges successfully is still ahead of us in the global front casting shadows of
pessimism on the volume of foreign exchange flows from the developed to the developing world
in the 2009/10 financial year.
On the domestic front inflation has yet to come within a sustainable single digit requiring
continuation of the contractionary monetary policy which affects the growth and expansion
of the country’s young private sector and curtails the contribution of interest income to overall
income of AIB. Therefore, the need for bringing inflation under control as soon as possible
through effective policy packages to address the challenges raised above and avoid their
dismal impact on the entire economy cannot be overemphasized. The situation also calls for
providing special attention to the enhancement of non-interest income and control of expenses
by the management and employees of AIB to mitigate the negative impact of curtailed credit
growth on the Bank’s income.
6 I would like to take this opportunity to thank the National Bank of Ethiopia, the Bank’s
shareholders and the Bank’s Board of Directors for their guidance and support and the team
of AIB’s Management and employees for their dedicated service to their Bank. Special thanks
goes to our customers for doing business with AIB without which AIB’s success stories could not
have been recorded over the past fourteen years. Their continued support is indispensable for
AIB’s success in the future. I would also like to thank our foreign correspondent banks for their
Annual Report
Finally, I look forward to fast global economic recovery, continuation of a high level of Ethiopia’s
economic growth within an environment of a sustainable level of domestic inflation. Achievement
of these lofty objectives sooner than later obviously provides an opportunity to AIB to report
another year of uninterrupted success story in 2009/10 financial year. Thank you.
7 Annual Report
The Board of Directors of Awash International Bank S.C. (AIB) presents to the 14th Annual
General Meeting of shareholders its report and audited financial statements of the Bank
covering the period of eighteen months ended June 30, 2009. The period covered is eighteen
months because the Bank had to meet a new legal requirement of changing its financial year
from the Gregorian Calendar year end to the financial year running from July 1 of each year to
June 30 of the following year.
In view of the challenges posed by tight monetary policy and foreign exchange constraints
faced during the period under review the operational results of the Bank during the
eighteen months period were encouraging. The aggregate income and expenses of the
Bank stood at Birr 715.5 million and Birr 412.4 million, respectively. A net profit after tax
of Birr 213.8 million was achieved reflecting earnings per share of birr 558.
Looking at the components of total income, interest income constitutes 58% followed by
gains on foreign exchange dealings, commission and service charges and other income at
8
Annual Report
25% and 17%, respectively. Credit growth was curtailed during the period following the
National Bank of Ethiopia’s directives issued to stem inflation. Consequently, the share of
interest income in the Bank’s overall income was lower than it used to be in prior years.
The share of gains on foreign exchange dealings in total income has become more prominent
than was the case in the past years partly owing to the accelerated depreciation of the local
currency over the period under review.
On the expense side, the lion’s share of about 44% was accounted for by interest expenses.
This was followed by salaries and benefits (24%), administrative and general expenses
(21%), and provision for doubtful loans and advances (11%). The share of interest expense
in total income continues to rise owing to the growing volume of interest-bearing deposits,
particularly savings deposits.
The significant depreciation of the Birr, apart from its potential contribution to encouraging
the country’s exports, has also led to a general price rise in imported materials which the
Bank uses causing significant increases in administrative and general expenses.
The Board of Directors recommends that out of the total appropriatable profit of Birr 152.4 9
million (Birr one hundred fifty two million four hundred thousand) Birr 7.6 million (Birr
seven million six hundred thousand) should be retained and a dividend of Birr 144.8 million
(Birr one hundred forty four million eight hundred thousand) paid in cash or used for the
purchase of the Bank’s shares, depending upon the shareholders’ choice.
Annual Report
The total deposit of AIB, including margins held on letters of credit, as at June 30, 2009
stood at Birr 5.3 billion. AIB crossed the Birr 5 billion mark in time as projected in its
strategic plan. Out of the total deposits, savings deposits accounted for 68.8%, followed by
demand deposits (21.4%), margins held on letters of credit (6.4%) and time deposits (3.4%).
The short term cost implications of the growing level of interest bearing deposits,
particularly when credit growth is curtailed due to the dictates of national policy, are
quite clear. Nevertheless, AIB’s deposit growth portrays the growing public confidence
in the Bank, which is the very foundation on which banking business stands. Deposit
growth also strengthens the base for future credit expansion which a growing economy
undoubtedly requires as well as the base on which the Bank’s continued profit growth
and shareholder benefits rest over the medium and longer term.
The growth of loans and advances was curtailed during the period under review as a
result of the tight monetary policy adopted by the National Bank of Ethiopia. Reserve
requirement which was raised from 5% to 10% in July, 2007, was further raised to 15%,
10 and liquidity requirement was also raised from 15% to 25% in April 2008. In addition,
a credit ceiling was also enforced during the first half of 2009. In a situation where the
Bank continues to record high deposit growth, the constraint on lending activity created
a strong negative impact on the contributions of credit activity to the Bank’s profitability.
Annual Report
The Bank’s level of net loans and advances of Birr 2.6 billion, net of provisions, in relation
to the level of its deposits of Birr 5.3 billion, including margins on letters of credit, indicates
a loan/deposit ratio of about 50% which is very low.
Since the growth and expansion of Ethiopia’s young modern private sector depends upon
the availability of a growing level of credit, we look forward to the easing of inflationary
pressures in the economy through concerted policy actions so as to allow banks to resume
an adequate rate of credit growth for the private sector as soon as possible.
The sectoral breakdown of loans and advances as at June 30, 2009 indicates that 35% was
taken up by domestic trade and services, followed by international trade (24%), building
and construction (16%), manufacturing (7%), agriculture (6%), transport (5%), and the rest
being taken up by others showing that domestic trade and services and international trade
continued taking up the lion’s share of the Bank’s loans and advances.
The Bank continued to give close attention to minimizing credit risk through pre-
disbursement precautions and post-disbursement follow-up as a result of which a non-
performing loans ratio of a single lower digit was maintained at the end of the period under
review. Birr 21.3 million was written off during the period and an additional provision of
Birr 43.5 million was held raising the total provision for doubtful loans and advances to
Birr 149.2 million as at June 30, 2009.
11
Annual Report
International Banking Operations of the Bank contributed over 30% of the Bank’s total
income during the period under review. The impact of the global financial crisis and the
subsequent economic crisis is reflected in a low growth recorded in foreign exchange
earnings of the Bank during the period under review compared to the 18 months period
ended 30 June 2008. The volume of the Bank’s export earnings showed a modest growth
of about 10% compared to export earnings during the 18 months period ended 30 June
2008. Foreign exchange earnings from international inward remittances grew only by 2%.
A small growth of about 3% was also observed in the volume of imports during the period
under review.
AIB opened 13 branches during the period under review in various parts of the country
raising the total number of its branches to 61 and making it the leading private bank in
Ethiopia in terms of branch network. AIB’s drive to take banking services closer to its
customers will continue based on appropriate studies.
In order to meet the Bank’s human resource requirements, particularly its branch
expansion program, the total number of the Bank’s employees increased to 2,284 as at
June 30, 2009 compared to 1,698 at the end of December 2007.
During the period under review, various education and training programs were undertaken
in order to upgrade the level of education and skill of the Bank’s employees. Accordingly,
503 and 475 employees benefited from formal education programs in 2008 and first half
12 of 2009; and 343 and 188 employees took short term training during 2008 and the first
half of 2009 respectively. The Bank will strengthen and continue its human resource
development programs in the future in order to meet the growing demand of its customers
for high quality, cost effective and efficient banking services.
Annual Report
Furthermore, the Bank conducted a salary scale and benefits study and made significant
salary adjustments in September, 2008 in addition to providing bonus and salary increments
to its employees in order to motivate them and so enable it to remain competitive in the
domestic banking industry.
2. Other Developments
2.1 Computerization
Though all branches in Addis Ababa, including the branches newly opened during
the period, provide on-line banking services to their customers, rolling out the on-line
banking services to outlying branches could not be made at the planned pace due to
various unforeseen circumstances. Only two outlying branches in Adama and one branch
in Hawassa benefited from this technology and are providing on-line banking services to
their customers. Special attention will be given to ensure that the remaining outlying
branches benefit from the technology as soon as possible.
the predominant majority of the Bank’s shareholders for paying up their subscriptions on
time as usual. We would also like to encourage the few shareholders who could not yet
fully pay up their subscriptions to pay them up soon in order to enable their Bank to reach
the paid-up capital target within the time frame set by the shareholders.
3. Looking Ahead
The future poses several challenges in the economic sphere both on the global and
domestic fronts. Although there are some signs of global economic recovery, there is still
no clear evidence on the speed of recovery and resumption of a sustainable growth path.
However, the strong will exhibited and the concerted actions being taken by governments
of developed economies to get out of the deep global financial and economic crises casts
a glimpse of hope. It appears that there is a strong will to grab the lessons to be learned
from the global crises and put in motion concerted global actions towards the emergence,
in due course, of a much more credible and responsible global financial system which
will no more become a cause for creating global financial and economic crises and their
negative impact on the economic well being of people all over the world. We look forward
to the fruits of the lessons learned from the global financial and economic crises.
On the domestic front, the tight monetary policy, which prevailed during the period ending
June 30, 2009 was marked by higher levels of reserve and liquidity requirements than
before and credit ceilings have continued into the 2009/10 financial year with a tougher
stance. Official reports indicate a decline in the magnitude of inflation, although single
digit inflation is yet to be achieved on a sustainable basis. The situation points towards
the need for the continuation of an appropriate set of policy actions in order to put inflation
under control as soon as possible.
It is clear that monetary policy measures make their own contributions towards reducing
inflationary pressures. However, it seems that the implications of the continuation of a
tight monetary policy on the health and growth of Ethiopia’s up-coming private sector,
including private banks, as well as on the country’s general economic growth, merits close
attention and analysis in tandem with an appropriate mix of policy measures required to
put inflation under control in a sustainable manner.
Another dimension to the challenge on the domestic front is related to the availability of
14
adequate foreign exchange to meet the requirements of a growing economy. Fast recovery
of the global economy benefits Ethiopia’s economy in several ways. It helps recovery and
growth of demand for Ethiopia’s export commodities as well as recovery of their global
prices. Furthermore, it facilitates timely release of financial grants from various foreign
sources and helps to increase tourist flows as well as remittances from Ethiopians living
Annual Report
abroad thereby enhancing the country’s foreign exchange earnings from which AIB will
benefit. Therefore, we look forward to a quick recovery of the global economy.
The recent significant depreciation of the Birr is expected to encourage growth of Ethiopia’s
export volumes in due course. However, credit requirements of exporters for maintaining
and increasing the volume of their exports has been on the rise owing to depreciation of the
Birr. Tight monetary policy and credit ceilings leave no room for banks to accommodate
this growing credit demand by exporters without heavily curtailing credit requirements
of private sector actors in other sectors of the economy engaged in providing essential goods
and services. The paradox of the need to enhance foreign exchange earnings from exports
which require a growing level of credit on the one hand, and enforcement of a water-tight
credit ceiling on the other, is indeed a delicate one. Nevertheless, it calls for urgent attention
and resolution.
Given the nature of the major challenges referred to above, meeting them successfully requires
concerted actions by all stakeholders and AIB will do its part. Obviously, meeting them
successfully brightens the hope of maintaining AIB’s track record of growing profitability
in the coming financial year, although the present environment of fast growing interest
bearing deposits and constrained credit growth do not justify such optimism at this stage.
Therefore, the situation also demands exploring avenues of enhancing non-interest income
and controlling expenses to the greatest extent possible. In this regard, concerted efforts of
the Bank’s Board of Directors, management and employees and continued strong backing
of the Bank’s shareholders are indispensable. We believe that the team spirit and concerted
actions which prevail among these stakeholders will continue in order to maintain AIB’s track
record of success in the coming year.
As we look ahead to the coming year, we see AIB relocated in its new Headquarters building
in the heart of Addis Ababa making the first private bank in Ethiopia, after the renaissance
of the market economy in Ethiopia, the first owner of its Headquarters building. We all look
forward to celebrating that landmark together thanks to the strong support and laudable
wisdom of the Bank’s shareholders. The Banks shareholders have always and unflinchingly
stood by their Bank in trying times to ensure that their Bank achieves, not only its short-term
business plans but also its far-reaching strategic objectives of becoming a strong, credible,
and respected first private bank always moving diligently in pursuit of its vision: TO BE THE
MOST PREFERRED BANK OF THE PEOPLE.
The Directors would like to take this opportunity to thank the National Bank of Ethiopia for
its guidance and the Bank’s customers for working with AIB and its shareholders for their
continued support. 15
engine of Ethiopia’s sustainable economic growth and development. We also look forward to
AIB’s successful operation in the coming year.
Auditors’ report
16
Annual Report
We have audited the annexed financial statements of the Awash International Bank Share Company on
pages 19 to 28 which have been prepared under the historical cost convention and accounting policies set
out on page 22.
The Directors are responsible for the preparation of the financial statements. It is our responsibility to form
an independent opinion on those statements, based on our audit, and to report our opinion to you.
BASIS OF OPINION
We conducted our audit in accordance with Generally Accepted Auditing Standards. Those standards
require that we plan and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a test basis, evidence
supporting the accounts and disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by the Directors, as well as evaluating the
overall financial statements presentation.
We planned and performed our audit so as to obtain all the information and explanations which we
considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the
financial statements are free from material misstatement, whether caused by fraud, irregularity or error.
We believe our audit provides a reasonable basis for our opinion.
17
The Bank had obtained unconditional financial guarantee bonds from an insurance company as collateral
to certain loans of which loans and accrued interest amounting to Br. 35,283,084 (31 December 2007 – Br.
37,095,243) had been claimed by the Bank in accordance with the terms and conditions of the guarantees.
However, these claims have not been settled by the insurance company and the Federal Supreme Court has
Annual Report
ruled in favour of the Bank with respect to the entire principal amounts claimed and interest thereon from
the date the insurance company was sued by the Bank. Both the bank and the insurance company have
appealed to the Federal Cassation Court. Our opinion is not qualified in this respect.
OPINION
In our opinion, the financial statements annexed, together with the notes thereon, present a true and fair view, in all
material respects, of the financial position of the Awash International Bank Share Company at 30 June 2009 and of the
results of its operations and cash flow for the eighteen months period then ended in accordance with generally accepted
accounting principles.
We have no comments to make on the report of your Bank’s Directors and in accordance with Article 375 of the
Commercial Code of Ethiopia 1960, recommend acceptance of it.
18
Annual Report
ASSETS
Cash and Bank Balances
Cash on hand 1a 478,417,174 177,462,283
Reserve Account with National Bank of Ethiopia 700,000,000 310,248,703
Payment and settlement account with
National Bank of Ethiopia 1,071,074,842 235,413,409
Deposits with local banks 99,419,498 557,732
Deposits with foreign banks 1a 837,866,527 350,943,402
3,186,778,041 1,074,625,529
Other assets 1a, 2 520,730,551 241,391,566
Treasury Bills - 550,000,000
Investments in shares 4,058,798 3,564,400
Loans and advances 3, 4 2,563,991,102 2,402,600,567
Customers' liabilities for commercial letters
of credit and acceptances, as per contra 1b 709,851,899 417,687,080
Fixed assets 1c, 5 147,161,743 93,192,385
TOTAL ASSETS 7,132,572,134 4,783,061,527
LIABILITIES
Deposits
Demand deposits 1,132,932,418 697,938,076
Savings deposits 3,648,934,344 2,426,412,932
Fixed deposits 180,543,692 294,846,699
4,962,410,454 3,419,197,707
Margins held on letters of credit 339,224,103 88,772,718
Other liabilities 6 325,830,413 322,192,075
Provision for tax 7 33,950,488 52,680,764
Bank's liabilities for commercial letters of
credit and acceptances, as per contra 1b 709,851,899 417,687,080
…………………………………………………….
BEKELE NEDI
CHAIRMAN OF THE BOARD OF DIRECTORS
CURRENCY: BIRR
Eighteen
months
ended Year ended
Note 30.06.09 31.12.07
INCOME
Interest income 9 414,632,251 232,346,001
Commissions and services 100,499,923 52,288,426
Gain on foreign currency transactions
and translations 179,567,957 84,909,801
Other income 20,768,207 12,559,141
715,468,338 382,103,369
EXPENSES
Interest expense 10 180,056,886 84,680,302
Salaries and benefits 100,661,514 42,905,968
Administrative and general expenses 11 88,054,809 46,670,398
Provision for doubtful loans, advances and
other receivables 3 43,509,000 28,402,827
Audit fee 115,000 115,000
412,397,209 202,774,495
NET PROFIT BEFORE TAX 303,071,129 179,328,874
PROVISION FOR TAX 7 (89,225,084) (52,680,764)
NET PROFIT AFTER TAX 213,846,045 126,648,110
TRANSFER TO LEGAL RESERVE (53,461,511) (31,662,028)
20 160,384,534 94,986,082
DIRECTORS' ALLOWANCE (8,019,227) - .
152,365,307 94,986,082
BALANCE BROUGHT FORWARD 94,986,082 68,176,184
Annual Report
CURRENCY: BIRR
Eighteen
months
ended Year ended
Note 30.06.09 31.12.07
21
Increase in cash and cash equivalents 2,112,152,512 386,615,278
Cash and cash equivalents at the end of the period/ year 3,186,778,041 1,074,625,529
Annual Report
The financial statements are prepared in accordance with the historical cost convention, generally
accepted accounting principles and the laws and regulations of Ethiopia including the Commercial
Code of Ethiopia 1960, Banking Business Proclamation No. 592/2008 and the Directives of the
National Bank of Ethiopia. The principal accounting policies are set out below:
Foreign currencies:
(a) (i) Foreign exchange transactions during the period are expressed in Birr at the actual rates
prevailing on the transaction dates.
(ii) Foreign currencies on hand and correspondent banks’ balances at 30 June 2009 are translated
at average exchange rates for transactions.
(b) Customers’ and bank’s liabilities for commercial letters of credit and acceptances are stated at
the full values of the commitments without deducting the margins held.
Fixed assets
(c) Depreciation is provided on the basis of the following methods per annum:
i) Premises
5% on straight-line basis.
ii) Computers and other assets according to a pooling system at the following rates
applied to the book values of each group of assets determined by adding additions
22
and deducting disposal proceeds of the year to their respective opening book
values:
Computers 25%
Other assets 20%
Annual Report
- Vehicles
- Office equipment
- Furniture and fittings
iii) Fixed assets in store are not depreciated.
CURRENCY: BIRR
2. OTHER ASSETS
30.06.09 31.12.07
Uncleared effects, local 242,799,535 126,451,870
Uncleared effects, foreign 146,234,865 22,361,424
Stationery stock 2,131,943 1,374,924
Other stock items 1,599,772 1,703,592
Prepaid rents 23,162,710 15,133,703
Other advances and receivables 72,532,237 38,121,263
Cheque books and revenue stamps 1,279,627 1,956,001
Managed loan 8,570,700 13,713,120
Acquired property 24,419,162 22,575,669
522,730,551 243,391,566
Provision for doubtful receivables (2,000,000) (2,000,000)
520,730,551 241,391,566
2,713,169,102 2,529,569,567
Less: Provision for doubtful loans and
advances:
Annual Report
2,563,991,102 2,402,600,567
Annual Report 2009 31
4. The Bank is a party to various legal proceedings in relation to loans and advances, the ultimate
4. resolution
The Bank isofawhich
party is
tonot expected
various legaltoproceedings
have a materially adverse
in relation effect and
to loans on the financialthe
advances, position of
ultimate
the Bank of
resolution or which
the results ofexpected
is not its operations.
to have a materially adverse effect on the financial position of
the Bank or the results of its operations.
CURRENCY: BIRR
5. FIXED ASSETS
Depreciation
Included in construction in progress is Br. 77,589,751 being 80% of the payments made for the
Included in of
construction construction
the Bank’sinheadquarters
progress is Br. 77,589,751
building being2009.
to 30 June 80% ofHowever,
the payments made for
the Bank’s thein the
share
construction of the Bank’s headquarters building to 30 June
ownership of the building has not yet been formally determined.2009. However, the Bank’s share in
the ownership of the building has not yet been formally determined.
CURRENCY: BIRR
6. OTHER LIABILITIES
30.06.09 31.12.07
C.P.O.s and certified cheques issued 103,263,871 101,890,398
Exchange commission payable 14,842,610 10,733,383
Blocking inwards 53,129,526 47,278,097
Current and savings accounts blocked 5,969,569 10,598,871
Other banks 55,817,602 76,081,712
Accrued interest 4,608,033 11,162,010
Board of Directors' allowance 8,019,227 -
Managed loan 8,570,700 13,713,120
Others 40,873,498 27,059,836
Dividends payable 3,586,796 5,469,927
MT and TT payable 19,436,214 14,475,445
Accrued annual leave 7,712,767 3,729,276
325,830,413 322,192,075
CURRENCY: BIRR
30.06.09 31.12.07
Letters of Guarantee 93,656,444 129,911,686
The Bank entered into capital commitments to construct a multi-storey banking and insurance
building in co-operation with the Awash Insurance Company S. C. The contracted cost of the
building, including variation orders up to 30 June 2009, amounted to Br. 181,875,000. The actual 27
share of the Bank's commitment is still to be formally determined.
Annual Report
16. COMPARATIVES
In order to facilitate comparison, certain of the 2007 figures have been reclassified in these financial
statements.
Annual Report
Branches Outside
Addis Ababa
36
Annual Report