Shares of United Bank sold above Par Value

Berhanu Getaneh, President of United Bank (Photo:
Berhanu Getaneh, President of United Bank (Photo:

New central bank directive on banks’ paid-up capital has inspired numerous share auctions.

Addis Ababa, Ethiopia United Bank has floated a week long public auction to sell off 18,514 subscribed shares that were not paid for.

The Bank earned 2.9 million Br from the auction two weeks ago, bringing revenues 76pc above the  par value of the shares floated.

The bank added 25pc to the initial par value of its shares, which, upon the foundation of the Bank, were floated at 100 Br. The highest bid per share came in at 176 Br.

The 14 year old bank complains that the absence of a secondary share market, which would have helped determine share value, has made it difficult for it to set a price. In November 2009, when it auctioned 133,477 shares, it circumvented the lack of a secondary market by internally setting the premium price 10pc (10Br) higher. It got a maximum offer of 160 Br for a share and collected a total of 13.3 million Br just one week after the auction had closed, on November 5, 2009.

That first auction was part of the bank’s strategy to increase its authorised capital to a billion Br, and paid up capital to 600 million Br, in an auction that would span three years.

Other banks quickly followed suit with similar auctions, in order to raise capital. This was especially true after a National Bank of Ethiopia (NBE) directive, which required all banks to have a paid up capital of half a billion Birr, came into effect.

Most notable was Nib International Bank (NIB), which sold 80,000 shares in just half a day. Read more