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Ethiopia: CBE Sick Loans Drop to Record Low
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Addis Fortune (Addis Ababa)
12 May 2008
Posted to the web 12 May 2008
Yohannes Anberbir
Addis Ababa
For the first time in decades, the ratio of non-performing loans (NPL) held by the state owned Commercial Bank of Ethiopia (CBE) has been slashed to below the internationally required amount of 10pc, disclosed a third quarter, un-audited report of the Bank.
This is a remarkable performance for a bank that once had a staggering ratio of NPLs a few years ago: Five years ago it was at 51pc, before the International Monetary Fund (IMF) pressured the CBE's management to set a target to reduce it to 24pc within two years. Despite aggressive campaigns in attempts to recover loans in the following years, CBE could not go any lower than 29.2pc in 2004/2005.
CBE has registered this current outstanding performance of NPL ratio even as its lending increased to 15 billion Br in the past nine months, up by 56pc from the same period last year. This figure represents an almost equal amount to what all commercial banks in the country have advanced as loans in 2006/2007.
CBE has also registered a stunning 1.3 billion Br profit before tax during this period, exceeding last year's by 28pc.The Bank has recovered four billion Birr from loans.
Its managers attribute this successful performance to an ongoing reform project, Business Process Re-engineering (BPR). Launched as a pilot project in a few branches and at the headquarters' international banking division, it is planned that the process will be completed during this financial year after its implementation in all branches.
"The reason behind the decision to expand the reform process into other branches is the positive feedback from staff members active in the reform work and also from our clients," according to a press statement CBE issued late last week. "The results of the reform where it was launched have been according to our plans and very successful."
However, the half-year success of the bank this year was amply attributed to the bank's international banking transactions. The bank had registered an un-audited 716 million Br in gross profit during the second quarter of the fiscal year. The growth of profit in the last quarter of the three is a walloping 584 million Br.
The oldest commercial bank in the county, CBE commenced its operation in 1942 with a capital of 65 million Br. It now has a 4.2 billion Br capital, which helps it to lend one billion Birr to a single borrower. It is half the size of the total deposit a private bank could mobilize.
CBE's assets are estimated to be more than 49 billion Br, over 60pc larger than all the other banks combined.
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However, CBE's management falls under strong criticism from industry analysts for failing to make public its audited books for its operations ending June 2007.
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