The Commercial Bank of Ethiopia (CBE) has boasted a generally positive assessment of its banking operations in the recently concluded 2015/16 fiscal year.
The bank’s report comes a few months after it merged with the Construction and Business Bank of Ethiopia. The merger gave the state-owned bank even bigger clout in the country’s nationalised banking industry. CBE’s branches subsequently rose from 965 to 1,136 following the historic deal.
The bank, invigorated by the merger as well as its expansive strategies, now commands well over 20pc of the industry’s pre-tax profits. During the last fiscal year, CBE bagged almost 14 billion Br in profit. The bank generated income of well over 27 billion Br, while it spent just above 13 billion Br. Its profits registered a 10.3pc increment compared with the 2014/15 fiscal year.
CBE, established half a century ago, is the dominant bank in the country. Though it would be difficult to compare it with private banks in Ethiopia, its share of the banking market in the country, in terms of branches, is above 40pc – three times more than its nearest competition, Awash International Bank.
With a significant 27pc rise from the 2014/15 fiscal year, CBE’s total assets reached 384.6 billion Br.
While the bank’s profits may have increased by more than 10pc, the growth rate at which its profit has been growing over the past five years has actually declined. Between 2010 and 2015, the bank reported an annual average profit growth rate of 41pc. However, the bank’s 2015/16 profit grew at an average rate four times lower than that level.
The bank’s dominance of the industry is also manifested in its cost of doing business. CBE spent roughly 48 cents to make a one-birr profit in last fiscal year. Though this figure surpasses last year’s expenditure in this regard, it is still lower in comparison with the private bank average by as much as 15 cents.
Though the bank’s income exhibited a considerable increase of more than four billion birr, its profit will be half that amount after tax due to the rise in expenses in the 2015/16 fiscal year.
The bank’s liquidity is in a better position, judging by the loan to deposit ratio. In the recently concluded fiscal year, the bank mobilised 46.8 billion Br in deposits. CBE recorded 288.5 billion Br in total deposits in 2015/16 – a 19.5pc rise from the previous fiscal year.
The bank’s 37pc loan to deposit ratio in 2014/15 dropped by 5.2pc in 2015/16, underscoring the healthy state of CBE’s liquidity. Experts note, however, that this may lower earnings below the bank’s actual capacity.
As by far the largest bank in the country, CBE disbursed 92 billion Br in loans during the last fiscal year, surpassing the previous fiscal year’s performance in this regard by 2.6pc. The bank also collected close to 48 billion Br in 2015/16.
With 16 private and two state-owned banks in Ethiopia, the banking industry in particular and the financial sector in general has been liberalised since more than two decades ago. However, more than a few are still calling upon the government to open up the sector to international players.
Source - Fortune