Financial Performance Analysis

In Case of Five Senior Private Banks and Commercial Bank of Ethiopia

A Research paper submitted to the department of Accounting and Finance for the
partial fulfillment of the requirement of the degree of bachelor of art (BA) in
Accounting and finance.

Prepared by;- Mr. Mahadi Anes Hussein

ID No-; 1085/07

Advisor;- Sima Gudeta

Haramaya University
College of Business and Economics
Department of Accounting and Finance

June, 2017
Haramaya, Ethiopia
ACKNOWLEDGMENT
Before everything and any words I would like to give my grateful thanks to almighty
ALLAH because of nothing is done except of his permission and gift of health and
tolerance to do everything in my study and as well as in my stay of school. Next my heart
full thank is goes to my Advisor Mr. Sima Gudeta for providing the necessary
information, guidance and advice from starting to end.
Last but not the least my gratitude and hart felt thanks go to my beloved families for their
support.
ABSTRACT

Financial performance (statement) analysis is the process of selection, evaluation

and interpretation of financial data, along with other pertinent information, to
assist in investment and other financial decisions. The objective of this study is to
measure and compare the financial performance analysis of five senior private
banks and government owned commercial bank of Ethiopia using ratio analysis
mainly CAMEL model. To analyze this study descriptive quantitative data and
secondary data source were used. These secondary data were collected from
annual report of those banks under study for recent last five years (2010-2014).
The collected data were analyzed and presented in form of percentage and table.
The ratios used for analyzing mainly includes profitability ratio, liquidity ratio,
credit risk and solvency ratio and efficiency ratio. These ratios are finally
interpreted and used to compare and judge the average performance of five
private banks and the giant commercial bank of Ethiopia.
CHAPTER ONE
1.1 Background of the study
Financial performance (statement) analysis is the process of selection, evaluation and
interpretation of financial data, along with other pertinent information, to assist in investment
and other financial decisions. It is a diagnostic tool of analysis that can help management to
identify the strength and weakness of the firm so that corrective actions can be taken starting
from planning, and also to consider the strength of the company as a motive for competitiveness
and growth. It is used to measure firm’s overall financial health over a given period of time and
can also be used to compare similar firms across the same industry or to compare industries or
sectors in aggregation (Financial Management teaching material, HU March 2009).
Financial performance analysis provides information about firm’s past performance and present
position using financial analysis method mainly ratio analysis. It reveals about firm’s important
facts like liquidity, profitability, efficiency in utilizing resource, debt management and
marketability. Thus, it is used to make comparison between two or more firms based on their
financial statement (Financial Management teaching material, HU March 2009).
Functions of Comparative study on financial performance between companies is that it helps to
understand which company perform better over a period of time. Understanding of these
performance helps both for internal management and external interested parties to make their
respective decisions.
Financial sectors of an economy mainly bank play an important role in its economic
development and prosperity of the country. Banking industry serves as the backbone of the
financial sector that accumulate saving from surplus economic unit in the form of deposit and
provide it to deficit economic units in the form of advances. Banking industry, being an
important pillar of financial sector of an economy, its performance measurement cannot be
neglected. Therefore, the aim of this study is analyzing and comparing the average financial
performance of five selected private banks (Awash, Dashen, Wogagen, NIB international and
bank of Absinya) with the giant government owned commercial bank of Ethiopia.

1.2 What is the 'CAMELS Rating System?'

The CAMELS rating system is a recognized international rating system that bank supervisory
authorities use in order to rate financial institutions according to six factors represented by the
acronym "CAMELS." CAMEL is a system of rating for on-site examinations of banks. Officially
known as the uniform financial institutions rating system (UFIRS), CAMEL is a supervisory
rating system adopted by the Federal Financial Institutions Examination council (FFIEC) on
1979. CAMEL stipulates the evaluation of financial institutions on the bases of critical
dimensions which are: capital adequacy, Asset quality, management, Earning and liquidity.
Sensitivity to market risk, a sixth dimension was added in 1997 and the acronym was changed to
CAMELS (Opez, 1999).
(El Mehdi FERROUHI, Mohammed V Agdal University).
1.3 An Overview of the Ethiopian banking system
Modern baking in Ethiopia started in 1905 with the establishment of Abyssinian bank which was
based on a fifty year agreement with the Anglo-Egyptian national bank. In 1932 the Ethiopian
government, under Emperor Haile Selassie, closed the bank of Abyssinia and established the
bank of Ethiopia. Later on with the departure of the Italians the state bank of Ethiopia was
established in 1943with a capital of 1 million Maria Theresa dollars by a charter published as
general notice no.18/1993 (E.C). In 1963, the state bank of Ethiopia also split into the national
bank of Ethiopia and the commercial bank of Ethiopia S.C.
The first private bank in banking industry was the Addis Ababa bank S.C. established in 1964
owned by Ethiopian and foreign shareholders. Until the end of 1974, there were several private
owned banks in Ethiopia and following the revolution, on January 1, 1975 all private banks and
13 insurance companies were nationalized and placed under supervision and control of the
national bank of Ethiopia. After the overthrow of the dergue regime several private banking
companies were formed during the early 1990s.(www.abyssinialaw.com).
Today around 18 banks are competitively operating in Ethiopia of which many of them are
privately owned. Commercial bank of Ethiopia which is government owned is the giant and long
lived bank having many branches across the country. These banks operating today includes Abay
bank (S.C), Addis International bank, Awash International bank, Bank of Abyssinia, Berhan
International bank, Bunna International bank, Commercial bank of Ethiopia, Cooperative bank of
Oromia(S.C), Dashen bank, Debub Global bank, Development bank of Ethiopia, Enat bank,
Lion International bank, NIB International bank, Oromia International bank, United bank,
Wegagen bank and Zemen bank.
1.4 Statements of problem
In a country like Ethiopia where there is no secondary capital market, banking industry take the
lion share of the country’s economy. The industry is characterized by problem high financial risk
and severe competition among banking firm in the industry. In today’s business world, there is
high challenge of competitions and better financial performance than competitors is vital for
survival. Failing to financially perform well by those banking sector result in the failure of
overall economy of the country. Banks always should have to analyze and evaluate their
financial performance periodically. Management of the banks needs to properly understand the
performance of their organization to make different decisions. However, analyzing of financial
statement (performance) needs sufficient knowledge and experience, because the failure to
properly analyze the performance of banks result on not only the failure of banking firms but
also failure of overall economy of a country. As per my knowledge, the study of financial
performance analysis is an area that have found no much study yet and some researcher who
made their study on this area limited their scope to comparing only two banks. Therefore, these
problems initiated the researcher to make further study on financial performance analysis of five
private old aged banks (average) and the giant government owned commercial bank of Ethiopia
for five years using modern method of analysis (CAMEL). So, this study is different from
previous study in its scope that it compares five private banks with commercial bank of Ethiopia.

1.5 Objective of the study

1.5.1 General objectives
The general objective of this study is to measure and compare the financial performance of five
private banks (average) and the government owned commercial banks for five years (2010-2014)
using CAMEL method.

1.5.2 Specific objectives

 To measure and compare the capital adequacy of five senior private banks (average) and
commercial bank of Ethiopia.
 To evaluate and compare the Asset quality of five senior private banks (average) with
commercial bank of Ethiopia.
 To assess and compare the management ability of five senior private banks and
commercial banks of Ethiopia.
 To evaluate and compare the earning ability of five senior private banks and commercial
bank of Ethiopia.
 To evaluate and measure the liquidity of five senior private banks and commercial bank
of Ethiopia.
1.6 Significance of the study
The current study under a title of comparative study of financial performance analysis between
five private banks and government owned commercial bank of Ethiopia has great significance to
the researcher, to those banks and their stakeholders and to other advanced researcher who will
undertake their study on this area. It pin points the knowledge gap of the researcher about
CAMEL rating model. This study also assists the management and the stakeholders of those
banks by providing financial information to make their respective decisions. And also it will be
used as a spring board for other researcher.
1.7 Scope of the study
The study mainly focus on comparative study of financial performance analysis between average
performance of five senior private banks(Awash international, Dashen bank, NIB international,
wegagen bank and bank of Abyssinia) and performance of the giant government owned
commercial bank of Ethiopia. It covers their financial performance of recent five years starting
from 2010-2014(G.C). Their performance will be measured and compared based on their annual
report of financial statement mainly income statement and balance sheet using CAMEL model.
1.8 limitations of the study
Due to the fact that no study can be made perfectly to optimum point, this study has also its own
limitations like lack of time, enough knowledge and other similar things. Some banks
information was not easily accessible and this study analyzed only some ratios of CAMEL
model.

1.9 Organization of the Paper

This paper is composed of four chapters. The first chapter present the introduction part of the
study which includes background of the study, statement of the problem, objective of the study,
significance of the study and scope and limitations of the study. The second chapter presents
review of literatures. The third chapter deals with the research methodology like source and
method of data collection, the fourth chapter deals with data analysis, interpretation and
presentation. The final chapter presents summary, conclusion and recommendation of the study.
 CHAPTER TWO
2. LITERATURE REVIEW

2.1 Theoretical review

2.1.1 An overview of financial statement (performance) analysis
Financial statement analysis or financial performance analysis is the process of reviewing and
analyzing a company’s financial statements to make better economic decisions. Its main purpose
is to utilize information about the past performance of the company in order to predict how it
will fare in the future and to identify potential problem areas and troubleshoot those.
2.1.2 Users of financial statement analysis
There are different users of financial state statement analysis. These can be classified into
internal and external users.
A) Internal users; - are the management of the company who analyzes financial statement
in order to make decisions related to operations of the company. These includes-
1. Management; - the managers of the company use financial statement analysis to make
intelligent decisions about their performance.
2. Owners; - small business owners need financial information from their operations to
determine whether the business is profitable. It helps in making decisions like whether to
continue operating the business, whether to improve business strategies or whether to
give up on the business altogether.
3. Employees; - employees need to know if their employment is secure and if there is a
possibility of a pay raise. They want to be the abreast of their company’s profitability and
stability.
B) External users; - are those who do not necessarily belong to the company but still hold
some sort of financial interest. These include-
1. Investors; - are people who have purchased stock or shares in a company need financial
information to analyze the way the company is performing. Depending on how the
company is doing, they will either hold onto their stock, sell or buy more.
2. Creditors; - are interested in knowing if a company will be able to honor its payments as
they become due.
3. Government; - government and regulating bodies of the state look at financial statement
analysis to determine how the company is performing in general so they can plan their
financial and industrial policies.
4. Customers; - are those who need to know about the ability of the company to service its
client into the future.
5. General public; - anyone in the general public, like students, analysts and researchers,
may be interested in using a company’s financial statement analysis.
(https://www.cleverism.com/finacial-statement-analysis)
2.1.3 Financial Statements
Represent a formal record of the financial activities of an entity. These are written reports that
quantify the financial strength, performance and liquidity of a company. Financial Statements
reflect the financial effects of business transactions and events on the entity.
Four Types of Financial Statements
The four main types of financial statements are:
1. Statement of Financial Position (balance sheet)
Statement of Financial Position, also known as the Balance Sheet, presents the financial position
of an entity at a given date. It is comprised of the following three elements:
Assets: Something a business owns or controls (e.g. cash, inventory, plant and machinery, etc)
Liabilities: Something a business owes to someone (e.g. creditors, bank loans, etc)
Equity: What the business owes to its owners. This represents the amount of capital that remains
in the business after its assets are used to pay off its outstanding liabilities. Equity therefore
represents the difference between the assets and liabilities.
2. Income Statement
Income Statement, also known as the Profit and Loss Statement, reports the company's financial
performance in terms of net profit or loss over a specified period. Income Statement is composed
of the following two elements:
Income: What the business has earned over a period (e.g. sales revenue, dividend income, etc)
Expense: The cost incurred by the business over a period (e.g. salaries and wages, depreciation,
rental charges, etc). Net profit or loss is arrived by deducting expenses from income.
3. Cash Flow Statement
Cash Flow Statement, presents the movement in cash and bank balances over a period. The
movement in cash flows is classified into the following segments:
Operating Activities: Represents the cash flow from primary activities of a business.
Investing Activities: Represents cash flow from the purchase and sale of assets other than
inventories (e.g. purchase of a factory plant)
Financing Activities: Represents cash flow generated or spent on raising and repaying share
capital and debt together with the payments of interest and dividends.
 4. Statement of Changes in Equity

Statement of Changes in Equity, also known as the Statement of Retained Earnings, details the
movement in owners' equity over a period. The movement in owners' equity is derived from the
following components:
 Net Profit or loss during the period as reported in the income statement
 Share capital issued or repaid during the period
 Dividend payments
 Gains or losses recognized directly in equity (e.g. revaluation surpluses)
 Effects of a change in accounting policy or correction of accounting error
(accounting-simplified.com/financial/statements/types.html)
2.1.4 Methods of financial statement analysis
CAMEL Model
CAMELS rating is an international (primarily USA) supervisory rating system to classify a
bank / financial institution's overall condition according to 6 factors. The six factors are
represented by the acronym 'CAMELS. It is basically ratio based model for evaluating the
performance of banks. It is a management tool that measures capital adequacy, assets quality,
and efficiency of management, earnings’ quality and liquidity of financial institutions. CAMEL
is a system of rating for on-site examinations of banks. Officially known as the uniform financial
institutions rating system (UFIRS), CAMEL is a supervisory rating system adopted by the
Federal Financial Institutions Examination council (FFIEC) on 1979.
BREAKING DOWN 'CAMELS Rating System'
The acronym CAMELS stand for the following factors that examiners use to rate bank
institutions:
Capital Adequacy
Examiners assess institutions' capital adequacy through capital trend analysis. Examiners also
check if institutions comply with regulations pertaining to risk-based net worth requirement. To
get a high capital adequacy rating, institutions must also comply with interest and dividend rules
and practices. Other factors involved in rating and assessing an institution's capital adequacy are
its growth plans, economic environment, ability to control risk, and loan and investment
concentrations.
Asset Quality
Asset quality covers an institutional loan's quality which reflects the earnings of the institution.
Assessing asset quality involves rating investment risk factors that the company may face and
comparing them to the company's capital earnings. This shows the stability of the company when
faced with particular risks. Examiners also check how companies are affected by fair market
value of investments when mirrored with the company's book value of investments. Lastly, asset
quality is reflected by the efficiency of an institution's investment policies and practices.
Management
Management assessment determines whether an institution is able to properly react to financial
stress. This component rating is reflected by the management's capability to point out, measure,
look after, and control risks of the institution's daily activities. It covers the management's ability
to ensure the safe operation of the institution as they comply with the necessary and applicable
internal and external regulations.
Earnings
An institution's ability to create appropriate returns to be able to expand, retain competitiveness,
and add capital is a key factor in rating its continued viability. Examiners determine this by
assessing the company's growth, stability, valuation allowances, net interest margin, net worth
level and the quality of the company's existing assets.
Liquidity
To assess a company's liquidity, examiners look at interest rate risk sensitivity, availability of
assets which can easily be converted to cash, dependence on short-term volatile financial
resources and ALM technical competence.
Sensitivity
Sensitivity covers how particular risk exposures can affect institutions. Examiners assess an
institution's sensitivity to market risk by monitoring the management of credit concentrations. In
this way, examiners are able to see how lending to specific industries affect an institution. These
loans include agricultural lending, medical lending, credit card lending, and energy sector
lending. Exposure to foreign exchange, commodities, equities and derivatives are also included
in rating the sensitivity of a company to market risk.
(www.investopedia.com/terms/c/camelrating.asp)

2.1.5 Ratio analysis

Ratio is the mathematical relationship between two quantities in the form of a fraction or
percentage. Ratio analysis is essentially concerned with calculation of relationships which after
proper identification and interpretation may provide information about the operations and state of
affairs of business enterprise. Ratio analysis is used to compare a firm’s performance and status
with that of other firms or itself over a time. Financial ratios help us identify some of financial
strengths and weaknesses of a company.
Types of financial ratios
Basically, ratio analysis for commercial banks mainly includes: -
 Profitability ratio
 Liquidity ratio
 Credit risk and solvency ratio
 Efficiency ratio

A) profitability ratio
The most common measure of bank performance is profitability. Profitability is measured
using the following criteria.
1. Return on Asset Ratio(ROA)
This ratio shows the ability of management to acquire deposits at a reasonable cost and invest
them in a profitable investments (Ahmed, 2009). This ratio indicates how much net income is
generated per birr of Asset. The higher the ROA, the more the profitable the bank.
ROA = net profit/total asset
2. Return on Equity (ROE)
Return on equity is the rate of return to shareholders or the percentage return on each birr of
equity invested in bank.
ROE = net profit/total equity
3. Profit to Expense Ratio (PER)
This ratio measures the operating profitability of bank with regard to its total operating
expenses. Operating profit is the earnings before taxes and operating expenses means to total
non-interest expenses. The ratio indicates to what extent bank is efficient in controlling its
operating expenses.
PER = Earning before tax/operating expenses
4. Return on Deposit ratio (ROD)
This ratio is one of the best measures of bank profitability performance. It reflects the bank
management ability to utilize the customers’ deposits in order to generate profit.
ROD = net profit/total deposit
Net interest Margin (NIM)
Net interest Margin is the difference between interest income and interest expenses. It is the
gross margin on banks’ lending and investment activities.
NIM = Net interest income/total Asset (Tamiru. 2016)
B) Liquidity ratio
Liquidity refers to the solvency of the firm’s overall financial position- the ease with which it
can pay its bills. Liquidity ratios measure the firm’s ability to meet its short-term obligations
as and when they become due. Lack of liquidity implies inability to meet its current
obligations leading to lack of credibility among suppliers and creditors (FM I module, march
2009). This ratio includes the following ratios-
1. Cash to Deposit Ratio (CDR)
Cash is the most liquid asset and depositors’ trust to bank is enhanced when a bank maintains
a higher cash deposit ratio (Tamiru,2016).
CDR =cash/deposit
2. Loan to Deposit Ratio (LDR)
This ratio indicates that the percentage of total deposits locked into non-liquid assets. The
higher ratio indicates lower liquidity.
LDR =loans/deposit
3. Loan to Asset Ratio (LAR)
This ratio measures the percentage of assets that are tied up in loans.
LAR =loans/total asset
C) Credit risk and solvency Ratio
This ratio determines the profitability that the firm default on its debt contacts. Higher level
of debt can lead to higher profitability of the bankruptcy and financial distress (Ross, 2005).
1. Debt to Equity Ratio (DER)
This ratio measures the ability of the bank capital to absorb financial shocks. The bank with
lower DER is considered as better as compared to the bank with higher DER.
DER = total debt/total shareholders
2. Debt to Total Asset Ratio (DTAR)
This ratio measures the amount of total firms’ debt to finance its’ total asset. Higher DTAR
ratio means that the bank has financed most of its’ assets through debt as compared to equity
financings.
DTAR = total Debt/total asset
 D) Efficiency ratio
Efficiency ratio measures how effectively and efficiently the firm manage and control its
asset. This ratio indicates the overall effectiveness of the firm in utilizing its assets to
generate revenue.
Asset Utilization Ratio (AUR)
This ratio measures how effectively the bank is utilizing all of its assets. Total revenues of
the bank are defined as net spread before provision plus all other income. Low AUR implies
that the bank is not using its assets to their capacity and should either increase total revenue
or dispose some of their assets (Tamiru, 2016).
AUR = total revenue/total asset
Operating Efficiency Ratio (OER)
This ratio measures the amount of the operating expenses per birr of operating revenues. It
measures managerial efficiency in generating operating revenue and controlling its operating
expenses.
OER = total operating expenses/total operating revenues

2.1.6 Advantages of financial ratio analysis

 Ratios are easy to compute
 Ratios provide standards of comparison at a point in time and comparisons to be
made with industry average, if available.
 Ratios can be used to analyze company’s time series in order to discover trends, shifts
in trends and values that deviate from other similar values.
 Ratios are useful in identifying problem areas of a company.

2.1.7 Limitations of financial ratio analysis

 Financial ratios provide little information that is useful
 Ratios seldom provide answers to questions they raise because generally they do not
identify the causes for the difficulties that the company faced.
 Ratios can easily be misinterpreted for instance; a decrease in the value of a given
ratio doesn’t necessarily mean that something undesirable has happened.
  Very few standards exist that can be used to judge the adequacy of a ratio or a set of
ratios.
 Many large companies operate a number of different industries and in such cases it is
difficult to develop a meaningful set of ratios to compare against industry average.
 Ratios do not take into account the distortions happened to financial statement due to
inflation
 It is difficult to generalize whether a particular ratio is good or bad.
2.2 Empirical study on comparative/ financial performance of banks
Ashenafi(2015), analyzed and compared three year financial performance of awash international
bank and dashen bank in case of dire dawa branch using CAMEL model and concluded about
their liquidity, profitability, capital adequacy, asset quality and management.
Tamiru(2016), in his comparative study of financial performance analysis between dashen bank
and zemen bank, analyzed and compared five year performance of two banks through CAMEL
ratios.
Barr et al. (2002) show that “CAMEL rating criteria has become a concise and indispensable tool
for examiners and regulators” and found that there is “a significant relationship between
CAMELS
ratings and efficiency scores”. Thus, various studies have focused on the application of CAMEL
approach to financial institutions.
Gupta (2014) analyzed public banks in India and found that there is a statistically significant
difference between the CAMEL ratios and thus the performance of all the public financial
institutions.
Mekdes (2016), analyzed the performance of major financial statement of Zemen bank for the
period 2011-2014 using CAMEL approach to evaluate Zemen bank capital adequacy ,asset
quality, management ,earning and liquidity and to determine financial performance ,operating
soundness and regulatory compliance of Zemen bank.
2.4 Knowledge gap
Banking industry, one of the major financial institution is the backbone of the economy of the
country. Thus their performance should be measured and analyzed periodically. To the best of
my knowledge banks financial performance analysis is an area that have not found yet enough
study and those previous studies limited their scope to only one or two banks. So this study
measure and compare five year financial performance analysis of five senior private banks and
the giant commercial bank of Ethiopia.
CHAPTER THREE
Research methodology
This study under a title of comparative study of financial performance analysis between five
senior private banks and the giant government owned commercial bank of Ethiopia was
undertaken through quantitative data that has obtained from annual report of those banks under
study. Due to the nature of the title, the quantitative data is more appropriate to measure the
financial performance of these banks.
Source of data
Due to the nature of this study the researcher used only secondary source data. This secondary
source of data has collected from annual report of financial statement of those banks under study
for the last five years (2010-2014).

Method of data analysis and presentation

The collected data was calculated and the average was taken for five private banks and it was
compared with commercial bank of Ethiopia, then personal interpretations follow. After the data
was collected and analyzed it was presented in the form of tabulation.
 CHAPTER FOUR

Data Analysis, presentation and interpretation

This chapter mainly explain the analysis, computations and interpretation of different CAMEL
model ratios which were computed based on the audited financial statement of five senior private
banks (Awash, Dashen, NIB, Wegagen, bank of abysinia) and government owned commercial
bank of Ethiopia. Five year annual financial statement (2010-2014) were used to analyze the
financial performance of those banks under study and all ratios are rounded to three digits.

Profitability Ratios

Awash International Bank

YEARS NPAT TA TE DEPOSIT ROA ROE ROD

2010 247,557,86 9,022,989,378 959,348,943 6,105,940,193 0.027 0.258 0.041

4
2011 360,692,58 11,089,440,85 1,336,496,54 7,743,781,257 0.033 0.270 0.047
2 9 9
2012 394,423,07 13,125,216,55 1,650,631,13 9,204,357,666 0.030 0.239 0.043
0 9 1
2013 438,608,63 17,783,926,77 2,066,218,96 12,545,208,62 0.025 0.212 0.035
7 0 8 2
2014 618,267,02 22,106,346,49 2,596,942,94 15,039,715,46 0.032 0.238 0.041
0 3 6 6
averag 0.02 0.24 0.041
e 9 3

Dashen Bank
YEARS NPAT TA TE DEPOSIT ROA ROE ROD

2010 324,037,25 12,353,386,03 1,123,347,63 10,144,549,77 0.02 0.28 0.03

0 8 1 6 6 8 2
2011 450,665,36 14,614,795,15 1,396,402,27 11,841,238,73 0.03 0.32 0.03
1 6 1 4 1 3 8
2012 652,012,12 17,520,042,31 1,827,893,69 14,065,599,99 0.03 0.35 0.04
2 9 5 9 7 7 6
2013 606,756,38 19,747,174,76 2,045,698,69 15,851,264,41 0.03 0.29 0.03
4 7 6 7 1 7 8
2014 712,484,27 21,962,202,06 2,597,625,19 17,681,343,16 0.03 0.27 0.04
6 3 6 6 2 4 0
averag 0.03 0.30 0.03
e 1 8 9
 Nib Internatioanal Bank
YEARS NPAT TA TE DEPOSIT ROA ROE ROD

2010 200,886,55 5,970,511,304 916,508,426 4,127,188,48 0.034 0.219 0.049

5 0
2011 246,432,99 7,111,808,078 1,170,759,91 5,157,401,34 0.035 0.210 0.048
6 9 3
2012 286,234,32 8,275,695,377 1,527,946,22 5,383,126,80 0.035 0.187 0.049
0 4 9
2013 286,267,55 9,144,543,615 1,665,929,31 6,655,214,04 0.031 0.172 0.043
2 9 1
2014 313,768,03 10,747,283,26 1,964,357,02 7,923,293,17 0.029 0.160 0.040
7 7 8 6
averag 0.03 0.19 0.046
e 3 0

Wegagen Bank
YEARS NPAT TA TE DEPOSIT ROA ROE ROD

2010 223,340,915 5,741,936,575 1,051,726,031 3,922,798,717 0.039 0.212 0.057

2011 323,277,726 8,060,937,378 1,337,335,157 5,957,483,833 0.040 0.242 0.054
2012 335,633,305 8,347,154,788 1,604,133,168 5,758,180,889 0.040 0.209 0.058
2013 340,057,631 10,393,803,401 1,830,424,820 7,550,846,153 0.033 0.186 0.045
2014 318,440,795 11,528,769,913 2,144,215,392 8,385,111,306 0.028 0.149 0.038
average 0.036 0.200 0.050

Bank of Abysinia
YEARS NPAT TA TE DEPOSIT ROA ROE ROD

2010 141,000,000 6,280,000,000 585,000,000 5,139,000,000 0.022 0.241 0.027

2011 181,000,000 7,278,000,000 661,000,000 6,075,000,000 0.025 0.274 0.028
2012 216,000,000 8,240,000,000 907,000,000 6,771,000,000 0.026 0.238 0.032
2013 216,000,000 10,129,000,000 1,108,000,00 8,496,000,000 0.021 0.195 0.025
0
2014 447,000,000 11,276,000,000 1,529,000,00 9,096,000,000 0.040 0.292 0.049
0
averag 0.027 0.24 0.032
e 8
 Commercial Bank of Ethiopia (CBE)
YEARS NPAT TA TE DEPOSIT ROA ROE ROD

2010 1,968,669,801 74,186,911,338 5,532,707,270 55,527,581,128 0.027 0.356 0.035

2011 2,863,517,562 114,645,190,270 6,333,141,736 89,056,657,358 0.025 0.452 0.032
2012 5,434,143,955 158,804,428,984 7,696,648,250 120,115,522,914 0.034 0.766 0.045
2013 5,866,086,445 195,443,220,143 9,193,823,484 154,438,278,908 0.030 0.638 0.038
2014 6,889,699,330 244,127,811,602 11,083,630,033 194,051,865,489 0.028 0.622 0.036
average 0.0288 0.5688 0.0372

Aggregate Average of five Banks Commercial Bank of Ethiopia (CBE)

Banks ROA ROE ROD ROA ROE ROD

Awash 0.029 0.243 0.041 0.027 0.356 0.035

Dashen 0.031 0.308 0.039 0.025 0.452 0.032
NIB 0.033 0.190 0.046 0.034 0.766 0.045
Wegagen 0.036 0.200 0.050 0.030 0.638 0.038
BOA 0.027 0.248 0.032 0.028 0.622 0.036
average 0.031 0.238 0.042 0.029 0.569 0.037

Interpretations
ROA is the ratio of profit after tax to total asset. It reflects the efficiency with which banks
deploy their assets. The higher the ROA, the most profitable is the bank. The above table shows
that the ROA aggregate average ratio of five private banks and CBE is 0.031 and 0.029
respectively. Thus five year average ROA of those private banks is greater than that of
commercial bank of Ethiopia and this shows that those five private banks in average are more
profitable than CBE in investing its asset in generating profit.
ROE is the ratio of profit after tax to total equity and this ratio indicates how much bank can
generate profit with the money the shareholders have invested. The higher the ROE ratio the
higher financial performance. The table shows that the ROE aggregate average ratio of those
private banks and CBE is 0.238 and 0.569 respectively. Thus five year average ROE of those
private banks is lower than that of CBE and this shows that CBE is generating more profit with
the money the shareholders have invested than those private banks.

ROD is the ratio of profit after tax to total deposit and this ratio indicates how much can bank
generate by utilizing its deposit from customers. The higher the ROD ratio the higher the
performance. Based on the above table five year average ROD ratio of those private banks in
average and CBE is 0.042 and 0.037 respectively. Thus ROD ratio of those private bank is
greater than that of CBE and this shows that those five private banks are more profitable in
utilizing its deposit to generate profit.
Liquidity Ratios

Awash International Bank

YEARS CASH DEPOSIT LOAN TA CDR LDR LAR

2010 3,320,883,67 6,105,940,193 2,997,376,96 9,022,989,37 0.544 0.491 0.332

0 7 8
2011 4,048,100,70 7,743,781,257 3,841,550,77 1,336,496,54 0.523 0.496 0.346
1 6 9
2012 2,935,382,23 9,204,357,666 5,335,718,37 1,650,631,13 0.319 0.580 0.407
8 6 1
2013 2,941,623,50 12,545,208,622 7,532,303,95 2,066,218,96 0.234 0.600 0.423
1 3 8
2014 4,290,349,69 15,039,715,466 8,967,602,62 2,596,942,94 0.285 0.596 0.460
4 9 6
averag 0.381 0.553 0.394
e

Dashen Bank
YEARS CASH DEPOSIT LOAN TA CDR LDR LAR

2010 5,255,357,875 10,144,549,776 4,938,736,202 12,353,386,038 0.518 0.487 0.400

2011 6,225,744,465 11,841,238,734 6,093,873,109 14,614,795,156 0.526 0.515 0.417
2012 5,774,617,824 14,065,599,999 7,949,369,597 17,520,042,319 0.411 0.565 0.454
2013 6,060,934,610 15,851,264,417 8,663,249,398 19,747,174,767 0.382 0.547 0.439
2014 6,542,817,642 17,681,343,166 9,429,628,139 21,962,202,063 0.370 0.533 0.429
averag 0.441 0.52 0.428
e 9

Nib International Bank

YEARS CASH DEPOSIT LOAN TA CDR LDR LAR

2010 2,568,663,35 4,127,188,48 2,446,830,784 5,970,511,304 0.622 0.593 0.410

8 0
2011 3,444,564,16 5,157,401,34 2,652,420,293 7,111,808,078 0.668 0.514 0.373
8 3
2012 2,730,682,84 5,383,126,80 3,608,327,548 8,275,695,377 0.468 0.618 0.436
0 9
2013 2,104,846,33 6,655,214,04 4,429,319,286 9,144,543,615 0.316 0.666 0.484
9 1
2014 1,915,986,82 7,923,293,17 5,407,739,082 10,747,283,267 0.242 0.683 0.503
 4 6
averag 0.463 0.615 0.441
e
Wegagen Bank
YEARS CASH DEPOSIT LOAN TA CDR LDR LAR

2010 2,835,731,814 3,922,798,71 2,375,625,606 5,741,936,575 0.723 0.606 0.414

7
2011 4,141,087,609 5,957,483,83 2,777,875,585 8,060,937,378 0.695 0.466 0.345
3
2012 2,601,306,261 5,758,180,88 3,478,972,954 8,347,154,788 0.452 0.604 0.417
9
2013 2,228,368,992 7,550,846,15 4,585,105,644 10,393,803,401 0.295 0.607 0.441
3
2014 3,006,191,021 8,385,111,30 4,527,528,687 11,528,769,913 0359 0.540 0.393
6
averag 0.505 0.565 0.402
e

Bank Of Abysinia
YEARS CASH DEPOSIT LOAN TA CDR LDR LAR

2010 2,963,000,000 5,139,000,000 2,920,000,000 6,280,000,000 0.577 0.568 0.465

2011 2,895,907,000 6,075,000,000 3,205,000,000 7,278,000,000 0.477 0.528 0.440
2012 2,523,111,000 6,771,000,000 3,797,000,000 8,240,000,000 0.373 0.561 0.461
2013 1,971,000,000 8,496,000,000 4,609,000,000 10,129,000,000 0.232 0.542 0.455
2014 2,746,000,000 9,096,000,000 5,061,000,000 11,276,000,000 0.302 0.556 0.449
average 0.392 0.551 0.454

Commercial Bank of Ethiopia (CBE)

YEARS CASH DEPOSIT LOAN TA CDR LDR LAR

2010 6,290,472,469 55,527,581,128 23,572,805,61 74,186,911,338 0.113 0.42 0.318

9 5
2011 17,428,451,14 89,056,657,358 35,099,262,35 114,645,190,27 0.196 0.39 0.306
5 0 0 4
2012 9,955,918,196 120,115,522,91 60,940,262,07 158,804,428,98 0.083 0.50 0.384
4 9 4 7
2013 15,150,715,10 154,438,278,90 69,674,773,18 195,443,220,14 0.098 0.45 0.356
5 8 2 3 1
2014 9,149,685,109 194,051,865,48 90,842,594,69 244,127,811,60 0.047 0.46 0.372
9 1 2 8
averag 0.107 0.44 0.347
e 4 9 2
Aggregate Average of Five Banks Commercial bank of Ethiopia (CBE)

Banks CDR LDR LAR CDR LDR LAR

Awash 0.381 0.553 0.394 0.113 0.425 0.318

Dashen 0.441 0.529 0.428 0.196 0.394 0.306
NIB 0.463 0.615 0.441 0.083 0.507 0.384
Wegagen 0.505 0.565 0.402 0.098 0.451 0.356
BOA 0.392 0.551 0.454 0.047 0.468 0.372
average 0.368 0.563 0.424 0.107 0.449 0.347

Interpretations
CDR ratio of total cash to total deposit and this ratio measures the company’s liquidity. The
higher the CDR ratio the better the liquidity position of the bank. The above table shows that the
CDR of those private banks and CBE is 0.368 and 0.107 respectively. The CDR of those private
banks is greater than that of CBE and this indicates that those private banks are more liquid in its
cash than that of CBE.
LDR ratio is the ratio of total loans to total deposit and it is another measurement of liquidity.
The higher the LDR the less liquid is the bank. The above table shows 0.563 and 0.449 LDR
ratio for those private banks and CBE respectively. Those private banks have greater LDR than
CBE and this shows that CBE is comparatively more liquid than those private banks.
LAR ratio is the ratio of total loan to total asset and measures the total loans outstanding as a
percentage of total asset. The higher this ratio indicates a bank is loaned up and its liquidity is
low. Based on the above table the LAR is 0.424 and 0.347 for those private banks and CBE
respectively. LAR of those private banks is greater than that of CBE and this shows that CBE is
more liquid than those senior five private banks in average.
 Credit Risk and Solvency Ratio

Awash International Bank

YEARS DEBT TE TA DER DAR EMR

2010 8,063,640,435 959,348,943 9,022,989,376 8.40 0.894 9.40

5 5
2011 9,752,944,310 1,336,496,54 11,089,440,85 7.29 0.879 8.29
9 9 7 7
2012 11,474,585,42 1,650,631,13 13,125,216,55 6.95 0.874 7.95
8 1 9 2 2
2013 15,717,707,80 2,066,218,96 17,783,926,77 7.60 0.884 8.60
2 8 0 7 7
2014 19,509,403,54 2,596,942,94 22,106,346,49 7.51 0.883 8.51
7 6 3 2 2
averag 7.55 0.882 8.55
e 5 8 5

Dahen Bank
YEARS DEBT TE TA DER DAR EMR
2010 11,230,038,407 1,123,347,631 12,353,386,038 9.997 0.909 10.997
2011 13,218,392,885 1,396,402,271 14,614,795,156 9.466 0.904 10.466
2012 15,692,148,624 1,827,893,695 17,520,042,319 8.585 0.896 9.585
2013 17,701,476,071 2,045,698,696 19,747,174,767 8.653 0.896 9.653
2014 19,364,576,867 2,597,625,196 21,962,202,063 7.455 0.882 8.455
averag 8.831 0.89 9.831
e 7

Nib International Bank

YEARS DEBT TE TA DER DAR EMR

2010 5,054,002,878 916,508,426 5,970,511,304 5.514 0.846 6.514

2011 5,941,048,159 1,170,759,919 7,111,808,078 5.075 0.835 6.075
2012 6,747,749,153 1,527,946,224 8,275,695,377 4.416 0.815 5.416
2013 7,478,614,296 1,665,929,319 9,144,543,615 4.489 0.818 5.489
2014 8,782,926,239 1,964,357,028 10,747,283,267 4.471 0.817 5.471
averag 4.793 0.826 5.793
e
Wegagen Bank
YEARS DEBT TE TA DER DAR EMR

2010 4,690,210,544 1,051,726,031 5,741,936,575 4.460 0.817 5.460

2011 6,723,602,221 1,337,335,157 8,060,937,378 5.028 0.834 6.028
2012 6,743,021,620 1,604,133,168 8,347,154,788 4.204 0.808 5.204
2013 8,563,378,581 1,830,424,820 10,393,803,401 4.678 0.824 5.678
2014 9,384,554,521 2,144,215,392 11,528,769,913 4.377 0.814 5.377
averag 4.549 0.81 5.549
e 9

Bank of Abysinia
YEARS DEBT TE TA DER DAR EMR

2010 5,695,000,00 585,000,000 6,280,000,000 9.735 0.907 10.735

0
2011 6,616,548,00 661,000,000 7,278,000,000 10.009 0.909 11.011
0
2012 7,332,672,00 907,000,000 8,240,000,000 8.085 0.890 9.085
0
2013 9,052,000,00 1,108,000,000 10,129,000,000 8.170 0.894 9.142
0
2014 9,747,000,00 1,529,000,000 11,276,000,000 6.375 0.864 7.375
0
average 8.475 0.893 9.470

Commercial Bank of Ethiopia (CBE)

YEARS DEBT TE TA DER DAR EMR

2010 68,631,909,739 5,532,707,270 74,186,911,338 12.405 0.925 13.409

2011 108,003,551,849 6,333,141,736 114,645,190,270 17.053 0.942 18.101
2012 150,494,318,271 7,696,648,250 158,804,428,984 19.553 0.948 20.633
2013 186,243,827,078 9,193,823,484 195,443,220,143 20.257 0.953 21.258
2014 233,035,530,905 11,083,630,033 244,127,811,602 21.025 0.955 22.026
averag 18.058 0.944 19.0854
e 6 6
Aggregate average of Five Banks Commercial Bank of Ethiopia (CBE)

Banks DER DAR EMR DER DAR EMR

Awash 7.555 0.883 8.555 12.405 0.925 13.409

Dashen 8.831 0.897 9.831 17.053 0.942 18.101
NIB 4.793 0.826 5.793 19.553 0.948 20.633
Wegagen 4.549 0.819 5.490 20.257 0.953 21.258
BOA 8.475 0.893 9.470 21.025 0.955 22.026
average 6.841 0.864 7.828 18.059 0.945 19.085

Interpretations
DER is the ratio of total debt to total equity and it indicates the proportion of assets financed
with debt relative to its shareholders equity. High DER means that a company has been
aggressive in financing its growth with debt and this involve high level of risk that result in
volatile earnings as a result of the additional interest expense. The above table shows that those
private banks in average and CBE has 6.841 and 18.059 DER respectively. Thus CBE has much
greater DER than those private banks and this indicate that CBE is more aggressive in financing
its asset using debt and it has more risk than those private banks.
DAR is the ratio of total debt to total asset and it measures ability of the bank capital to absorb
financial shocks. A high value of this ratio indicates that the banks has high degree of leverage,
and consequently, financial risk. Based on the above table the DAR is 0.864 and 0.945 for five
private banks in average and CBE respectively. Thus DAR ratio of CBE is greater than that of
those private banks and this indicates that CBE has more financial risk than that of those private
banks.
EMR is the ratio of the ratio of total asset to total shareholders’ equity and shows how many
dollars (birrs) of assets must be supported by each dollar of equity capital. The higher value of
this ratio indicates signal for risk failure. As shown on the above table EMR of those five private
banks in average and CBE is 7.828 and 19.085 respectively. Thus the EMR of CBE is greater
than that of those private banks and this shows that CBE is high leveraged and has more risk than
that of those private banks average
Efficiency Ratio

Awash International Bank

YEARS TR TA TI TOE AUR IER OER

2010 383,376,657 9,022,989,378 531,782,753 180,946,750 0.042 2.939 0.472

2011 532,840,954 11,089,440,859 718,076,570 213,006,995 0.048 3.371 0.400
2012 442,037,947 13,125,216,559 825,795,742 295,196,448 0.034 2.797 0.668
2013 529,509,158 17,783,926,770 1,057,044,353 474,025,798 0.030 2.230 0.895
2014 703,011,161 22,106,346,493 1,445,596,677 616,790,073 0.032 2.344 0.877
average 0.037 2.736 0.662

Dashen Bank
YEARS TR TA TI TOE AUR IER OER

2010 481,674,059 12,353,386,038 716,109,507 257,888,520 0.039 2.777 0.535

2011 678,512,220 14,614,795,156 956,917,322 327,038,940 0.046 2.926 0.482
2012 827,626,835 17,520,042,319 1,315,126,010 421,863,050 0.047 3.117 0.510
2013 796,053,367 19,747,174,767 1,326,912,694 513,978,486 0.040 2.582 0.646
2014 1,004,172,94 21,962,202,063 1,571,836,630 614,246,913 0.046 2.559 0.612
8
average 0.044 2.792 0.557

Nib International Bank

YEARS TR TA TI TOE AUR IER OER

2010 290,221,14 5,970,511,304 466,795,09 181,557,58 0.047 2.571 0.626

2 3 2
2011 323,795,36 7,111,808,078 537,234,75 193,159,97 0.046 2.781 0.597
4 4 1
2012 325,783,79 8,275,695,377 607,521,88 218,042,11 0.039 2.786 0.669
8 5 5
2013 280,669,75 9,144,543,615 666,239,86 287,665,93 0.031 2.316 1.025
0 9 0
2014 344,808,83 10,747,283,267 809,095,91 394,479,77 0.032 2.051 1.144
7 9 5
average 0.039 2.501 0.812
Wegagen Bank
YEARS TR TA TI TOE AUR IER OER

2010 318,090,59 5,741,936,575 489,599,34 163,546,02 0.055 2.994 0.514

4 4 3
2011 500,076,81 8,060,937,378 714,734,57 216,244,42 0.062 3.305 0.432
2 7 4
2012 363,030,96 8,347,154,788 664,813,38 251,989,20 0.043 2.638 0.694
6 8 9
2013 384,643,14 10,393,803,401 794,715,06 325,741,19 0.037 2.440 0.847
2 4 9
2014 408,777,47 11,528,769,913 838,304,01 431,280,46 0.035 1.994 1.055
5 1 6
average 0.046 2.674 0.708

Bank of Abysinia
YEARS TR TA TI TOE AUR IER OER

2010 207,000,00 6,280,000,000 342,000,00 145,000,00 0.033 2.359 0.700

0 0 0
2011 246,000,00 7,278,000,000 454,000,00 196,000,00 0.034 2.316 0.797
0 0 0
2012 226,000,00 8,240,000,000 515,000,00 226,000,00 0.027 2.279 1
0 0 0
2013 226,000,00 10,129,000,000 515,000,00 226,000,00 0.022 2.279 1
0 0 0
2014 451,000,00 11,276,000,000 869,000,00 345,000,00 0.040 2.519 0.765
0 0 0
average 0.031 2.350 0.852

Commercial Bank of Ethiopia (CBE)

YEARS TR TA TI TOE AUR IER OER

2010 1,248,763,84 74,186,911,338 3,247,451,338 931,463,418 0.017 3.486 0.746

5
2011 1,921,814,49 114,645,190,27 4,883,145,608 1,000,677,85 0.017 4.880 0.521
4 0 9
2012 3,418,672,92 158,804,428,98 8,445,726,428 1,464,730,41 0.022 5.766 0.428
3 4 8
2013 3,181,395,37 195,443,220,14 10,340,829,99 2,285,800,69 0.016 4.524 0.718
 0 3 9 8
2014 4,643,086,55 244,127,811,60 13,202,018,34 3,872,161,60 0.019 3.409 0.834
7 2 3 9
averag 0.018 4.41 0.6494
e 2 3
Aggregate Average of Five Banks Commercial Bank of Ethiopia (CBE)

Banks AUR IER OER AUR IER OER

Awash 0.037 2.736 0.662 0.017 3.486 0.746

Dashen 0.044 2.792 0.557 0.017 4.880 0.521
NIB 0.039 2.501 0.812 0.022 5.766 0.428
Wegagen 0.046 2.674 0.708 0.016 4.524 0.718
BOA 0.031 2.350 0.852 0.019 3.409 0.834
average 0.039 2.611 0.718 0.018 4.413 0.649

Interpretations
AUR is the ratio of total revenue (noninterest income) to total assets and measures capability of
firm to generate revenue with its assets. The high value of this ratio indicates the high
productivity (efficiency) of the firm. The above table shows that CBE and those private banks
average ratio of AUR is 0.039 and 0.018 respectively. Thus those five private banks in average
has greater AUR than CBE and this shows that those private banks are more efficient than CBE
in utilizing its assets to generate revenue.
IER is the ratio of total income (net interest income and noninterest income) to operating
expense (noninterest expense) and measures amount of income earned per dollar (birr) of
operating expense. The high value of this ratio indicates that the bank is more efficient in
generating total income in comparison to its total operating expense. As the above table shows
IER is 2.611 and 4.413 for those private banks in average and CBE respectively. Thus the IER of
CBE is greater than that of those private banks and this shows that CBE is more efficient in
generating total income than those private banks.
OER is the ratio of total operating (noninterest expense) to total revenue and it measures
managerial efficiency in generating operating revenues (noninterest income) and controlling its
operating expenses. Low OER is preferred as lower OER indicates that operating expenses are
lower than operating revenues. As shown in the above table OER is 0.718 and 0.649 for five
private banks in average and CBE respectively. Thus CBE has relatively lower OER than those
private banks and this implies that CBE is more efficient in generating income and controlling its
operating expenses.
 CHAPTER FIVE
CONCLUSIONS AND RECOMMENDATIONS

CONCLUSION
In this study financial analysis has been made in attempting to draw some conclusion on
performance between five private banks in average and commercial bank of Ethiopia. One of
main point to understand about the financial analysis is that all the information that would be
conclusive judgment about what is going on in these banks is found in the financial statement of
these banks. Five year (2010-2014) financial statement mainly income statements and balance
sheets have been used to analyze the financial performance using CAMEL model.
With respect to profitability the researcher concluded that those senior private banks five year
average profitability ratio is greater than that of the giant government owned commercial bank of
Ethiopia in ROA and ROD ratio. This implies that those private banks are generating more profit
than CBE using their assets and deposit, and this is the result of banks control of business
expenses and good investment of assets. On the other hand CBE has greater ROE ratio which
implies that it has been generating more profit with the money the shareholders have invested
than those private banks.
In general, from this analysis the researcher concluded that those private banks are more
profitable than CBE.
When we see the liquidity of those private banks and CBE, those private banks are less liquid in
terms of LOA and LDR ratios. This is as a result of making excessive loans and holding less
liquid assets during the period and increase in loans than deposit also resulted in less liquidity.
On the other hand those private banks are more liquid in terms of CDR which implies that they
have more cash to pay their depositors than CBE.
Based on these ratios, it can be concluded that CBE is relatively more liquid than those private
banks during the period.
In terms of credit risk and solvency ratio CBE has high level of risk in all DER, DAR and EMR
ratios and this is due to aggressive leveraging practices or financing its growth with debts and the
assets financed with debts is more than equity base or investors funded fewer assets than
creditors. So those private banks were more liquid and able to finance their assets with
shareholders’ equity than debt and decreased their interest cost so they have relatively less risk of
solvency than CBE.
Finally, managerial efficiency ratios are analyzed and concluded that CBE has more managerial
efficiency in both IER and OER ratio. This is because of that it able to generate more income
than expenses spent. It is also that property is being managed efficiently and more profitable for
investors, and less of the property’s income is covering operational expenses. On the other hand
those private banks are more efficient in terms of AUR and this is due to investment of those
bank’s assets on revenue generating activities than CBE.
In general CBE has relatively more managerial efficiency than those private banks during the
period.

In general we conclude that relatively CBE is less profitable, more liquid, has higher level of risk
and has more managerial efficiency.
RECOMMENDATIONS
Based on the above research findings the following recommendations are forwarded below in
order to enhance the financial performance of those five private banks and commercial bank of
Ethiopia.
Regarding those private banks in average they are more profitable than CBE as they have greater
ROA and ROD deposit ratio but they are less profitable in terms of ROE ratio so they need to
generate more income with the money their shareholders invested in order to pay high dividend
and support future growth. On the other hand they have more CDR but they are less liquid in
terms of LDR and LAR and this is due to that they are they are making more loan than deposit
and more of asset is tied up to loan which leads to less liquidity, so they need to decrease their
loan for better liquidity. They have less risk compared to CBE but they have less managerial
efficiency in terms of IER and OER and this is because of high operating and interest expenses
compared to income and revenue, so they need to control and decrease their operating and
interest expenses while generating revenue and income.

When we see financial performance of CBE its better than those private banks in terms of
liquidity and managerial efficiency but it is less profitable and have more credit risk than those
private banks. This is as a result of that its assets and deposits are not invested on more income
generating activities than those private banks and it needs to increase its return on asset and
deposit. Compared to those private banks CBE has higher DER, DAR and EMR this is as a result
of having high debt relative to equity, more of its asset is financed with debts and creditors have
contributed more than shareholders and this leads to high interest cost. So CBE needs finance
more of its asset and growth activities with shareholders’ equity and more of assets should be
supported by shareholders equity. When we see the liquidity and managerial efficiency of CBE it
has lower CDR and AUR respectively, which implies that it has lower cash and its asset is less
utilized in generating revenue than average of those private banks. So it needs to increase its cash
to get confidence and trust of its customers and also it needs to utilize its asset efficiently to
generate revenue.
In general CBE needs to work more on reducing financial risk and increasing its return on asset
and deposit compared to those private banks and those private banks also need to work on
increasing their liquidity and managerial efficiency by reducing its loan and total expenses.
REFERENCES
Ashenafi Miliyon, “comparative study on financial performance analysis of awash international
bank and dashen bank”,Dire Dawa university, 2015).
Barr,R.S.Killgo,K.A Simes,T.F.,Zimmel,S.(2002),evaluating the productive efficiency and
performance U.S commercial banks. Engineering management,28(8),33-25.
Financial ratios approach to evaluating financial performance of cal bank Ghana from 2010 to
2014, Eric Ekwahu Attefah and Ernest Appiah Darco ,(international journal of academic
research in business and social science),june 2016,vol,6, no.6,ISSN;222-6990.
Gupta,R.(2008).A CAMEL model analysis of private sector banks in India.Journal of Gyan
management,vol.2,No.11PP.3-8.
http://www.abyssinialaw.com/study-on-line/item/393-the-birth-and-development-of-banking-
services-in-ethiopia, accesed December 29,2016).
(https://www.cleverism.com/finacial-statement-analysis- accesed December 31,2016).
Mekdes Abebe, “financial statement analysis of zemen bank” Haramaya university, 2016.
Meseret Jejew, “comparative financial performance analysis; in case of awash international
bank and nib international bank”, Haramaya University, 2016.
Moroccan Banks Analysis Using CAMEL Model, El Mehdi FERROUHI, Mohammed V Agdal
University (Rabat), International Journal of Economics and Financial Issues,Vol. 4, No. 3, 2014, pp.622-
627,ISSN: 2146-4138.

Mulugeta D. and Temesgen K., FINANCIAL MANAGEMENT I , HU March, 2009.

Tamiru Hailu, “ financial statement analysis a comparative study between dashen bank and
zeman bank”, Haramaya university,2016.
(www.investopedia.com/terms/c/camelrating.asp accesed jauary 10 2017).
(www.awash international bank.com).
(www.commercial bank of Ethiopia.com).
(www.dashen bank.com).
(www.nib international bank.com).
(www.wegagen bank.com).
(www.bank of abysinia.com).