Commercial Bank of Ethiopia netted 6.8 billion Birr profit, exceeding its own 4.7 billion Birr target for the just ended first quarter by 146 percent. The bank amassed 30.5 billion Birr in gross revenues, which is also 148 percent of its own 20.6 billion Birr target for the period. Compared to the same quarter the previous year, its net profit and revenue surged by 122 percent and 92 percent, respectively.
Over the week, officials of the Ministry of Finance and Public Enterprises Holding and Administration Agency (PEHA) convened at Hilton Hotel to evaluate eight of the twenty major SOEs. Some of the SOEs performed beyond their plan while others fell far behind their profit forecast. In the presence of the Minister of Finance, Ahmed Shide, heads of the SOEs were scrutinized for wrong planning and faltering performance, The Reporter learnt from insiders.
The lion’s share of CBE’s lump of revenue is attributed to loans, followed by service charges from international trade. Its foreign currency revenue during the first three months of the current fiscal year stood at USD613 million, an 11 percent improvement from last year’s yet 13 percent behind the bank’s target for this quarter.
“The robust performance can be attributed to two factors. The bank has revised its service charges back in February 2021, increasing its loan interests and other charges to the industry level. Secondly, we embarked on internal reform since July 2020, when new management and board were established. The reform is paying off after a year now,” says Muluneh Aboyeh, VP for Risk Compliance Management at CBE.
CBE increased most of its service charges nine months ago, increasing its service charges to an average of 9.8 percent, up from the 8.6 percent rate previously. More than two third of the revenue of banks in Ethiopia is generated from loan interest, according to studies.
“The growth rate of our profit is now far higher than our expenses, unlike the trend before the reforms. We aim to maintain this momentum throughout the year,” added Muluneh.
Tekei Alemu (PhD), senior financial expert and economist, argues it takes a revelation to perform according to plan, given the economic turbulence. “Due to the economic uncertainties, it is difficult to craft accurate plan supported with quality data and implement policies effectively. But one thing is clear. The banks are generating more revenue from service charges, generating more loan interest,” the Economist said.
Basically, commercial banks are buying foreign currency with lower exchange rate and selling it for higher rate, according to him.