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Ethiopia’s financial giant, the Commercial Bank of Ethiopia (CBE) declared success amid pending litigation by the Federal Anti-Corruption and Ethics Commission (FACEC) against one of its Vice Presidents and reports of employee dissatisfaction.
CBE has earned a staggering record high gross profit in the last Ethiopian budget year. It cashed in 7.9 billion birr gross profit while its revenue swelled to 11.5 billion birr.
The existence of a huge unbanked population in rural part of the country and the economic progress the country is registering over the last decade are fueling the bank’s upward success, according to Yishak Mengesha, Chief Business Development officer of the bank.
The total deposits of the bank has surpassed 122 billion birr as of July 8, 2012 showing 35.5 billion birr growth in the bank’s deposit mobilization capacity as compared to the 2010/11 budget year. The bank disbursed close to 70 billion birr in loans while it has collected back 20.5 billion birr in the concluded Ethiopian budget year surpassing its collection plan by more than 20 percent. Its Non Performing Loan (NPL) has declined from staggering double digits four years ago to less than one percent last year.
“Our NPL is standing at 0.7 percent. This is below the world average of three percent. Ours is a very good one,” said Yishak during a briefing about the bank’s performance.
The implementation of Business Processing Reengineering, the launch of a Credit Processing Center and the strengthening of the Debt Recovery Department of the bank are credited for holding bad debt at bay according to the chief business development officer of the bank.
Working with more than 20 international money transfer agents, the Bank has raked in USD 4.9 billion into the country mainly from export earnings and remittances. As compared to the previous fiscal year, the bank’s hard currency inflow increased by USD 800 million. Its assets climbed to historic record highs; 155 billion birr up from 114 billion birr in 2010/11. Its capital and reserve has reached 7.5 billion birr, up from 6.2 billion birr. It has 12,782 staff.
The bank also plans to raise its number of accounts by 25 percent every year in a bid to mobilize deposits mainly to finance government mega projects like the Grand Renaissance Dam. It also plans to open 150 additional branches equipped with modern banking IT infrastructure every year. Though it operates 58 ATM machines currently, the bank officials say it has made all the necessary preparation to import 400 ATM this year.
The bank branch network has reached more than 559. This makes the financial giant one of the most accessible banks in the country by possessing more than 60 percent almost 900 C.B branches network.
CBE’s deposit mobilization capacity emanates from its wide branch network. That enabling the bank to reach the unbanked community of the country. It is cited as one of the driving force behind the increased domestic saving of the country. Ethiopia’s domestic saving has increased from 5.2 percent of the GDP to 8.8 percent in the past two years.
The bank’s core banking project started operation connecting 34 of its branches in Addis Ababa in the first phase of its automation project last May. That has now increased to 200 branches. The automation projected enabled over 1.5 million account holders to reach their account in real time. CBE has 3.9 million account holders.
The new IT infrastructure will also enable the bank to strengthen and extend its relations with credit card providers such as Visa and MasterCard as well as roll out new mobile and Internet banking services. Thus, the bank’s customers will enjoy reduced waiting time and greater choice of banking channels and services through it wider branch network across the country.
The bank’s Vice President for human resources, Seifu Bogale, was put behind bar at the beginning of the week due to his alleged involvement in corrupt practice while he was a vice president of the Purchasing Department, a post he assumed before transferring to human resource. The issue is currently under investigation by prosecutors of FACEC.
“I don’t comment on a pending legal issue,” argued Yishak when asked about the VP.
A customer and employee satisfaction survey conducted by an external research firm last year revealed a mixed result. It reported a customer satisfaction of more than 80 percent while employee’s satisfaction was reported to be less than 50 percent. The bank conducted such a survey two year ago for the first time. The employee dissatisfaction mainly emanates from the bank’s inability to benefit its employees from the government housing project it finances throughout the country according to Capital sources in the bank.
“We conduct customer and employee satisfaction survey to support management’s decision. It is not yet completed, we will let you know by the time it raps up,” stated Yishak.
CBE is the bank behind the booming condominium construction in the country. It is already prepared to finance the new middle income condominium dubbed as 40/60 by Addis Ababa City Government. It has already prepared a department to handle the new scheme and identifies 30 branches to carry on its registration.
“Since CBE is a public bank, we think financing such a community development project as one of our goals,” said Yishak.
CBE gross profit meant almost double of what it has cashed in as gross profit in the 2010/11 budget year; 4.2 billion birr and more than double of the cumulative gain of 14 commercial banks operating in the country at present.
National Bank of Ethiopia imposed a tough measure on the lending capacity of private banks but the banks remained profitable in the last Ethiopian Fiscal Year. Fourteen private banks currently operating in the country amassed more than 3.5 billion birr in gross profit. The commutative gain of the 14 commercial banks is less than half of what CBE earned over same time period. Their collective gain stands at 3.544 billion birr representing only 45 percent CBE’s gross profit. Dashen Bank raked in a staggering 896.5 million birr gross profit in the last budget year; leading the more than a dozen of private banks. Dashen’s landmark gain is up from the 451 million birr net profit it announced the previous budget year.
NBE, the financial sector regulating arm the government, introduced a bill that compels private banks to buy government bonds which consumes 27 percent of the loan disbursement capacity of each bank that bears only three percent interest as opposed to the five percent interest they give on deposits they mobilised almost a year ago. The introduction of the directive managed to suck out more than 11.5 billon birr from the private financial sector of the country according to reports. The directive was introduced in April 2011, ending two-year long credit cap policy in the industry.