The Commercial Bank of Ethiopia (CBE) has reaffirmed its position at the forefront of the financial industry, bolstered by new capital and a strong balance sheet following the resolution of state-owned enterprise (SOE) obligations. This revitalization at the micro level is reflected in macroeconomic success: the fiscal year 2024/25 has concluded with a notable improvement in the country’s current account balance, highlighting a period of significant economic stabilization.
The recently released third edition of the Financial Stability Report reveals that CBE’s systemic importance gained considerable traction during the fiscal year ending June 30, 2025. The report, which offers a thorough assessment of the Ethiopian financial sector’s health, credits this growth to the implementation of bold macroeconomic reforms during the period.
According to the report, Ethiopia’s only systemically important bank (SIB) increased its market share, reversing a declining trend observed in previous years. CBE successfully passed all three stress tests conducted as of June 2025, which evaluated its resilience to credit, liquidity, and foreign exchange risks. As a result, despite existing market concentrations, the systemic risk posed by this SIB is now deemed low.
The report outlines that CBE is undergoing extensive institutional reforms, including a comprehensive overhaul of its lending policies to government enterprises, workforce capacity building, and the enhancement of its institutional frameworks. Additionally, the bank is strengthening its capital buffers through a government capital injection and concessional financing from the World Bank. “In doing so, the bank will continue to play a major role in sustainably supporting Ethiopia’s economic development,” the report states.
In the fiscal year ending June 30, 2025, CBE’s market share across key balance sheet indicators rebounded significantly compared to the previous year. Its share of total banking sector assets rose from 47.9% to 49.1%. More notably, its share of loans and bonds increased sharply from 45.2% to 51.7%, and its share of deposits grew from 47.1% to 48.1%. The bank’s capital market share surged from 24.2% to 43.1%.
“These figures illustrate the bank’s increasing market share and reaffirm its status as the only systemically important bank in Ethiopia’s financial system, thanks to comprehensive reform activities,” the report noted, while cautioning that “this situation heightens concentration risk within the financial system.”
The report also points to a significant improvement in the current account balance, with the deficit narrowing from 3% of GDP in June 2024 to just 0.2% in June 2025. This improvement is seen as evidence of the economy’s positive adjustment to the liberalization of the exchange rate. In absolute terms, the current account deficit shrank dramatically from $6.2 billion in June 2024 to $289.3 million in June 2025, signaling a systemic improvement in the balance of payments.
Foreign currency reserves experienced a significant increase. The National Bank of Ethiopia’s (NBE) reserves rose by over 209% year-on-year, while commercial banks’ foreign currency holdings reached $2.8 billion. “This strengthened reserve position has allowed banks to reduce net foreign exchange obligations and allocate more foreign currency to businesses,” the report stated.
As of June 2025, the total assets of the financial sector, including social security institutions, reached 5.6 trillion birr, representing a 40% increase from 4 trillion birr the previous year. This growth elevated the sector’s share of GDP to 37.2%, up from 34.6% in June 2024.
In terms of credit allocation, the trade sector (both domestic and international) maintained the largest share of aggregate bank loans, accounting for 41.5% of total outstanding loans at the end of June 2025, compared to 39.7% a year earlier. In contrast, the manufacturing sector’s share of outstanding loans fell from 23% to 16.2% during the same period. The report attributes this decline in part to the Commercial Bank of Ethiopia’s (CBE) balance sheet restructuring, which involved converting a portion of its manufacturing loan portfolio into bonds. This restructuring is part of a broader effort supported by a ten-year, approximately 900 billion birr government capital injection and a $700 million World Bank loan, aimed at addressing non-performing loans of state-owned enterprises and mitigating exchange rate shocks.
At the end of the review period, the 31 commercial banks were classified based on total asset size as follows: one large bank (CBE), five medium-sized banks, and 25 small-sized banks.
