Hibret Bank faced a staggering setback, with its profits plummeting by a massive 76%! This dramatic drop highlights the significant impact of Ethiopia's shift to a market-led foreign exchange regime. Let's dive in and understand the details.
In the latest fiscal year, Hibret Bank's pre-tax profit took a nosedive, falling to 749.04 million birr. This represents a substantial decrease of 2.33 billion birr compared to the previous year. The primary culprit? Severe losses stemming from the nation's transition to a new foreign exchange system.
The bank reported a staggering 3.76 billion birr in losses from foreign currency trading. This was largely due to the mismatch between its foreign currency assets and liabilities following the rapid depreciation of the Birr. But here's where it gets controversial: the sudden shift to a market-based floating exchange rate on July 29, 2024, replaced the long-standing fixed regime. The Birr's value plummeted from approximately 57 per dollar before the float to over 150 per dollar by late 2025. This triggered massive valuation losses across the entire banking sector.
Mesfin Tessema, Board Chairperson of Hibret Bank, acknowledged the unprecedented pressure on the bank's balance sheet. He stated that the new foreign exchange regime caused significant negative impacts due to the imbalance of foreign currency assets and liabilities. He also mentioned that despite these challenges, the bank managed to remain profitable through strict measures and the establishment of a Board Crisis Management Committee, along with management changes.
As part of these changes, the bank saw a leadership transition. Negusu Gebregziabher was appointed president and CEO in August 2025, succeeding Melaku Kebede, who resigned in August 2024. Negusu's experience, including his previous role as a senior advisor to the president of the Bank of Abyssinia and leadership positions at the Commercial Bank of Ethiopia and Lion International Bank, was deemed critical to navigating the post-float environment.
And this is the part most people miss: Hibret Bank wasn't alone in facing these currency-related losses. The impact of the floating regime rippled far beyond the financial sector. Ethio Telecom, the country's largest state-owned enterprise, reported a massive 41.45 billion birr in forex losses in 2024/25. This represented an astounding 1,825 percent increase from the previous year, significantly impacting its operating income and leading to a 70 percent plunge in profit after tax. The telecom operator attributed these losses to the Birr's sharp depreciation and the translation of USD-denominated liabilities, underscoring the economy-wide shock.
In response, Hibret Bank implemented several measures, including strengthening internal controls, tightening expense management, and implementing efficiency measures to mitigate the impact. However, operating expenses still rose to 15.99 billion birr, a 57.61 percent increase year-on-year. Foreign exchange losses accounted for 23.46 percent of total costs, interest expenses 37.35 percent, and employee-related expenses made up the remainder.
Despite the turbulent environment, the bank's revenue saw growth. Total revenue reached 1.674 billion birr, up 26.55 percent, primarily driven by net interest income, which contributed 77.19 percent of earnings.
Other key financial highlights include a 17.96 percent increase in total assets to 113.93 billion birr. However, total capital decreased by 2.88 percent to 12.28 billion birr due to regulatory adjustments. Deposits rose by 24.16 percent to 92.68 billion birr, primarily supported by transactional and savings accounts. The bank's loan book expanded to 79.33 billion birr, up 15.15 percent, with a focus on trade-related activities, manufacturing, and export businesses.
What are your thoughts on Hibret Bank's challenges and the impact of the new foreign exchange regime? Do you think the bank's measures were sufficient to navigate the crisis? Share your opinions in the comments below!
