Source: Business Info Ethiopia

Addis Ababa, Ethiopia 9 (10 February 2023)

The banking sector in Ethiopia has experienced significant growth in the fiscal year 2021-2022, at least in nominal terms, with respect to deposits, loans, capital build-up, and operations (branches and employees).

Data available up until December 2022 indicates a 29% increase in total deposits to reach Birr 1.9 trillion and a 37% increase in loans, pointing to a continued expansion of the banking sector in the first half of the new fiscal year.

The market share developments in the banking sector continue to show the Commercial Bank of Ethiopia (CBE) having slightly more than half of the total deposits, while private banks have collectively moved towards the 50% mark and stood at 48% as of 2022. The private banks have also gained a greater deposit market share, with slightly more than half (52%) of the deposit increase coming from them.

Both private banks and the state bank have experienced growth in profits, with private banks reporting pre-tax profits of Birr 30bn, roughly double their levels from three years ago, and CBE’s profits only slightly below the combined profits of all private banks. The combined banking sector profit pool is now $1.2 billion in USD terms, with private banks having a slight lead and a 52% market share in 2022.

The growth of the banking sector can be attributed to the banks’ large net interest margins (6% of assets), significant other income sources (mainly FX fees and 3% of assets), low operational costs (5% of assets), and generally low provisions for bad loans (0.5% of assets). However, high inflation has somewhat exaggerated the nominal growth figures, resulting in negative real growth rates in deposits, assets, and capital.

The very high effective loan-to-deposit ratio of almost 100% has resulted in a limited cushion being set aside for unexpected customer cash withdrawals, leading to frequent liquidity constraints faced by banks with high ratios. The cost of provisions for bad loans has also become an increasing concern for the industry, rising from 3% of total expenses to 5-6% in the past two fiscal years.

Source: Cepheus Capital


The opinions expresses here in the post "Highlights of the Banking Sector Performance in Ethiopia 2021-2022" are those of the individua's contributor(s) and do not necessarily reflect the views of Business Info Ethiopia , BIE Intelligence PLC, its publisher, editor, or any of its other contributors.


Hanna is an aspiring economist in her final year at Addis Ababa University. She has written hundreds of insightful daily stories, analyses, and features about the Ethiopian economy and beyond.

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