The COMESA-based financial institution is expanding its geographical reach in Africa and attracting investors from the continent, Asia and Europe. PTA Bank's rebound is a sign both of the global interest in investments in Africa and the need for financial institutions that are able to support the integration of Africa's regions.Ten years ago the bank was in crisis. In late 2013, however, the balance sheet nearly doubled to $2.2bn from $1.3bn in January 2012.Commercial banks see us as a very strong partner, and this is unique in the finance industryThe return on equity for the past five years has been more than 10% and rose to 14% in 2012. "And this year we are looking at about 15%, and that's on a dollar balance sheet," says Admassu Tadesse, the president and chief executive of PTA Bank.
"We are a development finance institution with long-term lending targeting small businesses, microfinance, agriculture and long-term lending for infrastructure. These are all the areas that the market typically does not serve very well," explains Admassu."But we also have a very strong trade finance mandate, a package of services to clients moving in and out of short, medium and long-term lending, which is a very interesting suite of services to be able to provide."There is a strong commercial attractiveness for short-term lending, he says. According to Admassu: "It's much less risky, so about two-thirds of our portfolio is in short-term lending and a lot of it is structured trade finance - so it's collateral-backed, asset-backed short-term lending which is very attractive."
Investors are queuing up both to finance and to buy into the bank, which has been growing its asset base at around 30% per year for nearly four years."Everybody is captivated by the Africa narrative, and everybody wants exposure," explains Admassu."But how do you manage your exposure in a smart way? You have countries like Zimbabwe, Ethiopia, Sudan. These are not frontier markets that are very well known to standard commercial banks, so people get comfort working with us because we are multilateral. We have the IFC [International Finance Corporation]-type legal structure."
With its November 2012 international syndicated loan, PTA Bank raised $150m from a diverse group of banks."We've always had a good relationship with Asian banks, but the Bank of Tokyo-Mitsubishi came in for the first time, as well as the Industrial and Commercial Bank of China. These two were amongst the biggest banks that participated in our syndicated loans," says the bank's president."We spend about 50% of our time building and maintaining our relationship with commercial banks who see us as a very strong partner, and this is quite unique in the finance industry."Current shareholders are also increasing their stake in the bank. It is receiving $35m from existing shareholders, and a further $43m is coming from new subscriptions. PTA Bank is an in- stitution of the Common Market for Eastern and Southern Africa (COMESA) and currently has 17 member states from COMESA.South Africa, Botswana and Angola are not members, but the bank has invited all of the remaining Eastern and Southern Africa countries that are not part of COMESA to join."We said all these countries that border the Eastern and Southern African space, we should be open to do- ing business with them too.
So they're now eligible to join as well, including Algeria, Tunisia, Chad and the Central African Republic," explains Admassu.The next important evolution was a change in January 2013 to the structure of shareholdings. Previously, all shares had a 20/80 split: 20% paid-in capital and 80% callable."Commercially oriented institutional investors, they don't like this business of callable capital contingent li- ability because that's the thing only states can really do. They have unlimited taxpayer money if they ever need to raise it," he says.The new 'class B' shares behave like a typical company's shares because they are paid for in full and earn dividends.
