- Why that alone won’t guarantee a rosy future alone.

By Hayal Alemayehu

The Commercial Bank of Ethiopia has been one of the major movers of Ethiopia’s economy for the last seven decades or so, as it was the only commercial bank operating in the country for over half a century. This has eventually turned the bank to become east Africa’s banking giant currently operating over 210 branches nationwide, excluding the office it opened in Juba, southern Sudan's capital.

Despite the fact that the banking sector was opened for local investors fifteen years ago, CBE still controls the lion’s share of the market. It is still one of the major credit providers to governmental institutions and enterprises as it could easily provide, unlike the private operators, economy of scale services to these organizations. The bank has been rendering services to these institutions, including the Ethiopian Electric Power Corporation (EEPCo), Ethiopian Airlines and Ethiopian Telecommunications Corporation (ETC), which have been playing a major role in the overall economy.

Thanks mainly to these big time customers and its steadily increasing international banking operations; CBE is still making relatively huge profits, particularly over the last several years, after it sharply cut down its non-performing loans (NPLs) which would otherwise have destroyed it altogether. (Only seven years ago, the bank’s NPLs were over 50 percent of the total loan it mobilized, way above the five percent mark for a commercial bank to be considered healthy by international standards.)

The bank has this week announced yet another record performance for the first three quarters of the current Ethiopian fiscal year.

According to its latest performance report, CBE has grossed 2.1 billion birr profit although the amount is five percent short of the target the bank set earlier.

The report indicates that total deposit at the bank reached an all time high of 54.8 billion birr during the third quarter of the current fiscal year, the amount picking up by a sheer 10.4 percent against the figure registered during the preceding quarter. The deposit registered during the review period has surpassed the target by 4.6 percent (or 2.4 billion birr).

The bank secured USD 1.9 billion from its international banking operations during the reported period, an amount 0.8 percent higher than the target. Similarly, the bank obtained USD 707 million from same operations during the third quarter alone, the amount exceeding the target, according to the report.

The report indicates that the bank has dispensed 12.6 billion birr loans to the different sectors of the economy during the reported nine months, an amount 1.2 percent higher than the target. The total amount of loan the bank issued has reached 21.8 billion birr, excluding its investment in bond and treasury bills which amount 29.3 billion birr.

The bank has been able to collect loans amounting to 6.4 billion birr during the first three quarters of the current fiscal year, an amount 13.1 percent higher than the target, the report indicates.

Among the bank’s major performance is its sharply cut down non-performing loans (NPLs). At the end of the reporter period, the bank’s NPLs stood at an all time low of 2.2 percent of the total loan the bank mobilized, which amount to 473.1 million birr, according to the report.

The report states that the performance of the bank during the third quarter of the current fiscal year is better than the preceding ones.

The bank’s total revenue during the reported nine months stood at 3.5 billion birr, registering a 6.9 percent increase against the target set earlier. While the bank’s total assets reached an all time high of 72 billion birr in its 68-year-history at the end of the reported period, it paid up capital and reserve stood at 5.4 billion birr.

According to data compiled last December, the total deposit at CBE was 57.8 percent of the amount deposited in all banks operating in the country while the loan CBE mobilized account for 48.1 percent the total issued by the banking industry.

Particularly over the last five years, CBE’s income has been significantly growing. And, for the first time, the bank had last year called a press conference to announce its record performance before the management decided to make it a rule than an exception to do so from then onwards.

While the last several years have been witnessing CBE’s improving performance, industry observers argue that alone will not guarantee a better future for east Africa’s banking giant.

It is imperative for the bank to be equipped with modern banking technologies and solution that revamp its current, rather traditional, banking system compared the service being provided by banks even in neighboring countries such as Kenya.

As the country is on its way to join the WTO which sooner or later require the opening up of the financial sector to foreign operators, CBE has, at least, to show it is preparing to launch a modern banking service that can compete with foreign operators render.

Size alone, at the end of the day, does not mean anything with current technologies making it more than easy for a bank much smaller than CBE to provide yet better banking service.

In a country where there is no national payment system, things may look challenging for the banks, including CBE, to go the modern way. Yet, it is high time for CBE to take the lead to that end as the private banks created over the last fifteen year simply follow the approach the state-owned giant operates.