OIB Has Grown Its Paid Up Capital To Birr 3 Billion
OIB Has Grown Its Paid Up Capital To Birr 3 Billion
OIB Has Grown Its Paid Up Capital To Birr 3 Billion
Oromia International Bank S.C. (OIB) was established in accordance with the pertinent laws,
regulations and the 1960 Commercial Code of Ethiopia, by the Monetary and Banking
Proclamation No. 83/1994 and by the Licensing and Supervision of Banking Proclamation
No. 592/2008. Accordingly, on September 18, 2008, OIB obtained a banking business
license. At the time of its establishment, OIB’s authorized capital was Birr 1.5 billion,
whereas its subscribed capital was Birr 279.2 million, and its paid-up capital Birr 91.2
million. OIB began operation on October 25, 2008 by opening its first branch at Dembel City
Center, named Bole Branch. Now, the Bank’s branches reached more than 300.
OIB has grown its paid up capital to Birr 3 Billion.
Conventional Banking
Current Account
Saving Account
Fixed Time Account
Bank Guarantee
Special Savings
Loans and Overdraft Facilities
International Banking
Trade Finance
Forex Services
Foreign Currency Accounts
International Money Transfer
Correspondent Bank information
International Money Transfer Info
Ways to Bank
Card Banking
Mobile Banking
Internet Banking
Agent Banking
Districts & Branches
ATMs & Agents
Vision
To Become the Bank of Your First Choice In Ethiopia
Mission
We are committed in providing full-fledged and best quality commercial banking services
within the pertinent regulatory requirement with due diligence to sustainable business while
empowering the missing middle and discharging social responsibility by engaging highly
qualified, skilled, motivated and disciplined employees and state-of-the- art information
technology, adding real value to the shareholders’ interest and win the public trust.
C, Show Your “Improved’’’ Mission and Vision of the Company
Vision
TO BECOME A WORLD CLASS COMMERCIAL BANK BY THE NEXT YEARS
MISSION
Are Committed To Best Realize Stakeholder's Needs Through Enhanced Financial
Intermediation Globally And Supporting National Development Priorities By Deploying
Highly Motivated Skilled And disciplined Employees As Well As State Of The At
Technology.
3, INTERNAL ASSESSMENT
Ratios are indicators; sometimes they serve as pointers but not in themselves powerful tools of
management. The ratios help to summarize the large quantities of financial data and to make
qualitative judgment about the firm’s financial performance (Thukaram, 2006).
Types of Ratios
According to Fraser and Urmston (2004) there are four categories of ratios used in financial
statement analysis. These are: (1) liquidity ratios, which measure a firm’s ability to meet cash needs
as they arise; (2) activity ratios, which measure the liquidity of specific assets and the efficiency of
managing assets; (3) profitability ratios, which measure the overall performance of a firm and its
efficiency in managing assets, liabilities, and equity; (4) leverage ratios, which measure the extent of a
firm’s financing with debt relative to equity and its ability to cover interest and other fixed charges.
Profitability performance
The profitability performance of OIB is assessed based on Return on Equity framework. The ROE
framework starts with the most frequently used measure of profitability, ROE, and then breaks it
down for convenient and systematic way to identify strengths and weaknesses in a bank’s profitability
performance. Identification of strengths and weaknesses, and the reasons for them provides an
excellent tool for researchers as means to look profitability performance. The role of ROE and the
breakdown of the ROE framework are summarized in the next chart.
ORGANIZATIONAL STURACTURE
B, ORGANIZATIONAL CHART FOUND
Return on assets (ROA), is primarily an indicator of managerial efficiency; it indicates how capable
management has been in converting assets into net earnings.
Equity multiplier (EM), is a measure of leverage or financing policies: sources chosen to fund the
financial institution (debt or equity).
Asset utilization (AU), is a measure of portfolio management policies, especially the mix and yield
on assets. And
Net profit margin (NPM), is a measure of effectiveness of expense management (cost control) and
service pricing policies.
If any of these ratios begins to decline, management needs to pay close attention and assess the
reasons behind that change.
Return on Equity
ROE is the most important indicator of a bank’s profitability and Growth Potential. It measures the
amount of net income after taxes earned for each Birr of equity capital contributed by the banks
stockholders. Higher ROE increases the price of shares in the capital market and shareholders also
expect higher dividend distribution
Return on Asset
Return on Asset determines the net income produced per Birr of assets and useful to measure
profitability linked to the asset size of the bank. In other way, it can be expressed as net earnings per
unit of a given asset which shows the conversion of banks assets into profit. Higher return on asset is
appreciated and favorably considered by the owners of the banks. On the other hand, it is usually
affected by disposal and acquisition of asset. When the level of asset increase, it is likely that ROA
will decrease and vice versa. Unlike other business organizations, assets of the bank are financial in
nature, like loan and Treasury bills
Equity Multiplier
It shows how much the bank is leverage and measures the Birr value of assets funded with each
dollar of equity capital. The higher the equity multiplier ratio, the more leverage or debt the bank is
using to fund its assets and its solvency risk has increased,
Asset Utilization
Asset Utilization measures the bank’s ability to generate income from its assets. The more income
generated per Birr of assets, the more profitable the bank (Thukaram, 2006). For suitability of the
study the researchers’ breakdown AU ratio as interest income and noninterest income generated per
dollar of total assets. The interest income and non-interest income ratios are not necessarily
independent for example, the bank’s ability to generate loans affect both interest income and, through
fees and service charges, non-interest income. High values for these ratios signify the efficient use of
bank resources to generate income and are thus generally positive for the bank.
It measures the net income generated per birr of total operating income, which is composed of interest
and non-interest income. In addition to that profit margin measures the bank’s ability to control
expenses. The better expense control, the more profitable the bank. It is often far-sighted to break
these ratios down
Liquidity performance
Banks must be capable of meeting their obligations when they fall due. If the depositors or other
lenders do not have confidence that the claims can be met, they will stop depositing or lending funds
to the bank. The acquisition of deposits and other funds is a necessary condition for the expansion of
loans and investments beyond the amount permitted by the use of equity only. Maintaining adequate
liquidity is a key constraint on the bank's profit-making capacity. Liquidity ratios provide the primary
means of judging a bank's liquidity position. Norms for liquidity ratios of business firms are possible
because their liabilities are predictable due to their fixed maturities.
For banks, there are no universally recognized liquidity ratios as a large percentage of their liabilities
(e.g. deposits) are due on demand. Nevertheless the following ratios can be used as partial indicators.
Therefore, the liquidity of OIB is measured based on liquid asset to average total asset ratio, liquid
asset to deposit, and loan to deposit ratio.
Liquid asset to total asset ratio is a direct method of assessing the liquidity of bank in terms of the
overall total asset. Here a higher ratio indicates a higher liquidity proportion and a lower ratio
indicates small portion of liquid asset from the overall total assets. In general it gives an indication of
how much of the bank asset are tied in to liquid assets. It is the reverse of loan to total asset ratio,
which measures the amount of bank asset tied up by illiquid assets
Liquid assets to deposit and short term borrowing ratio (LADST) is additional direct method of
assessing the liquidity of bank which indicate the percentage of short term obligations that could be
met with the bank’s liquid assets in the case of sudden withdrawals
Net loan to deposit and short term borrowing ratio indicates the percentage of the total deposits locked
into non-liquid assets. A high figure denotes lower liquidity
Credit performance is concerned with examination of the risk associated with a bank’s asset portfolio.
Credit performance evaluates the risks associated with the bank’s asset portfolio i.e. the quality of
loans issued by the bank (Thukaram, 2006). Several ratios can be used for measuring credit quality
however, not all information on the loans is always available. Therefore this paper uses percentage of
loan loss provision and net non-performing assets to net loan and advance ratios.
This ratio indicates the proportion of the total portfolio that has been set aside but not charged off. It
is a reserve for losses expressed as a percentage of total loans. Provision for loan losses item
represents the bank management’s prediction of loans at risk of default for the period. While the loans
remain on the banks’ balance sheet, the expected losses from any bad loans affect 15 net income and
equity on the income statement and balance sheet, respectively
Net non-performing assets to net loan and advance show the proportion of non-performing loans from
the total loan and advance granted by the bank
The performance of management capacity is usually qualitative and can be understood through the
objective evaluation of management systems, organizational culture, control mechanism, and so on.
However the capacity of the management of a bank can also be weighed with the help of certain ratios
of offsite evaluation of a bank. The capacity of the management to deploy its resources, to maximize
the income aggressively, to utilize the facilities in the bank productivity, and to reduce costs can be
measured using financial ratios
It measure the cost incurred per birr of income. In other way, it measures the income generated per
birr cost. That is how expensive it is for the bank to produce a unit of output. If the cost to income
ratio is lower, better performance will be achieved
Overhead efficiency measures the bank’s ability to generate non-interest income to cover noninterest
expenses. In general the higher this ratio, it will be better to cover non-interest expenses. However,
because of the high levels of non-interest expenses relative to non-interest income, overhead
efficiency is rarely higher than
The ratio Net interest margin shows the net return per banks earning assets which are investment
securities and loans and leases
Ratio analysis is a widely used and useful technique to evaluate the financial position and
performance of any business unit but it suffers from a number of limitations. According to Kiosk, 16
et al (2012) the reader of financial statements must understand the basic limitations associated with
ratio analysis. As analytical tools, ratios are attractive because they are simple and convenient. But too
frequently, decision-makers base their decisions on only these simple computations. The ratios are
only as good as the data upon which they are based and the information with which they are
compared.
One important limitation of ratios is that they generally are based on historical cost, which can lead to
distortions in measuring performance. Inaccurate assessments of the enterprise’s financial condition
and performance can result from failing to incorporate fair value information. Also, investors must
remember that where estimated items (such as depreciation and amortization) are significant, income
ratios lose some of their credibility.
Finally, analysts should recognize that a substantial amount of important information is not included
in a company’s financial statements. Events involving such things as industry changes, management
changes, competitors’ actions, technological developments, government actions, and union activities
are often critical to a company’s successful operation. These events occur continuously, and
information about them must come from careful analysis of financial reports in the media and other
sources.
4, EXTERNAL ASSESSMENT
Strategy Implementation and organizational performance Six questions were raised to analyse the
strategy implementation outcome to the organization. The findings are summarized as follows.
44
According to the table presented which addressed strategy implementation three factors had a mean
above 4.00 and the rest three factors assessed score above 3.8 this implies that strategy
implementation had lead to increase the above mentioned factors. 59% of respondents agree that
strategy implementation has lead to increase number of employee, while 82%, 76 % and 81% of
respondent respectively believe that strategy implementation has lead to increase opening of new
branch, increase new product and service development and increase customer base. Therefore one
can conclude that strategy implementation has improved the above mentioned factor since this
factors are related to each other that the improvement in employees pay increase employees
satisfaction. Improving new product and service development also increase number of employee and
Three questions were raised to examine the strategy concern about performance measurement. The
Conclusion
Based on major findings in the previous section the researchers conclude the following points
regarding financial performance of OIB with in previous four performance measurement areas.
Higher ROE is recorded on the year 2011 which was 17.50% due to lower provision in loan and
losses and the ROA also remains favourable during this period due to strong asset growth as the total
asset grew from 722,465,359.00 in 2010 to 1,540,205,704.00 in 2011. The researchers believes that an
increase of loan & advance were the main contributors to the increase in asset. In addition to that,
higher NPM was recorded in similar year showing an efficient reduction of non-interest expenses to
total operating income ratio.
On the other hand, ROE and ROA was at minimum on the year 2012 due to decrease in assets size
compared with previous periods. Similarly, NPM was at minimum in the same year because of an
increase in provision for loan and advances to total operating income ratio, which the researchers
believe under estimated in the previous period 2011.
In related with source of finance, EM ratio of the bank shows an increasing trend within the study
period and it can be conclude that the bank becomes more leverage from period to period and
consequently its solvency risk has increased. In general, it can be concluded that the trend in ROE was
favourable, but it is difficult to say it was consistent within the review periods.
The result of LAATA and LADST ratios indicates reduction in proportion of liquid assets from the
overall total assets which leads to declining in liquidity position of OIB within the study period. The
researchers believes that the reason in declining of liquidity ratio was parallel with the decline in
growth rate of liquid asset compared with previous periods and as a result of more funds becomes
invested in other company share and long term assets.
NLDST ratio also supports the previous conclusion that the growth in proportion of illiquid assets
within the study period was up warding, as a result of the portion of deposit tied up by loans or
illiquid assets becomes high and liquid assets to the reverse.