Amhara Bank, the new heavyweight contender in Ethiopia’s expanding banking industry, has recently accepted and approved a proposal from its shareholders to increase the bank’s capital to ETB 20 billion.
The decision was made during a general assembly held by the bank last Thursday. The chairman of the board of directors, Ato Melaku Fenta, explained the need for the capital increase, citing the government’s decision to open up the country’s banking sector to competition from foreign banks.
According to Mr. Melaku, the presence of foreign banks in Ethiopia’s banking sector could lead to mergers and acquisitions of local banks. This has caused both hope and fear among existing and new local banks, as they work to prepare themselves for the potential changes. One measure that some banks are taking is increasing their capital in order to reduce risk and better withstand the upcoming competition. Mr. Melaku noted that Amhara Bank, while initially having a high amount of paid-up capital, now has a capital ratio that is insufficient compared to that of other existing banks and the anticipated competition.
The bank’s shareholders, understanding the importance of increasing capital for the possibility of mergers or acquisitions and working with foreign banks, accepted and approved the proposal to raise the bank’s capital. They have decided to fully raise the additional capital within three years. To achieve the goal of increasing the bank’s capital to 20-billion-birr, new shares will be distributed and sold to existing shareholders, bank employees, and new buyers.
The decision to increase capital is a proactive measure taken by Amhara Bank to ensure that it is well-prepared for the potential changes and competition in Ethiopia’s banking sector. By increasing its capital, the bank will have a stronger financial foundation and be better able to withstand any challenges that may arise. This will also position the bank to take advantage of any opportunities that may come its way, such as the possibility of working with foreign banks or engaging in mergers and acquisitions. Overall, the capital increase is a strategic move that will benefit Amhara Bank and its stakeholders in the long term.