Comparative Analysis of Financial Performance of Private Commercial Banks in Ethiopia
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Date
2018-01
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Addis Ababa University
Abstract
The purpose of this study was to evaluate the Comparative Analysis of Financial Performance of
Private Commercial Banks in Ethiopia for the period of 5 years from 2012 to 2016. To this end,
review of relevant theoretical and empirical literature was made. Besides, data/information on
financial performance that are believed to affect performance of private commercial banking in
Ethiopia was gathered from sources such as reports of National Bank of Ethiopia and that of
respective private commercial banks, and other relevant sources. Then, the gathered
data/information was presented, analyzed and described using quantitative techniques. Financial
ratios were employed to measure the profitability, liquidity, asset quality and efficiency as well
as growth rate in total assets and total income of banks; in addition Analysis of Variance
(ANOVA) was used to test the significance differences of profitability, liquidity and efficiency
means among peer banks groups. Ethiopian private commercial banking sector remained stable;
banks are adequately capitalized and profitable and remained in a sound position. The study
found that, there is no a significant means difference of profitability among of peer banks groups
in terms of ROE and NIM. However, a significance differences among banks group is existed in
terms of ROA. And also there is no a significant means difference of liquidity among of peer
banks groups in terms of loan to total assets, liquid asset to deposit and loan to deposit. There is a
significance difference of efficiency among banks group is existed in terms of cost income ratio
(CIR). The possible recommendations are strong measurement framework should be deployed
ROA improvement targets through the management structure of the organization. Resource
mobilization is a must in order to narrow the gap between the loan demand and its provision or
supply of the financial resources. Performance improvement is required in order to lower the C/I
ratio and becomes the better performer in the banking sector. Improving the ability of
management to identify and manage credit risk is also required in order to have a better quality
in asset.
Key words: financial performance, financial ratios, private commercial banks, Ethiopia
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Keywords
financial performance, financial ratios, private commercial banks, Ethiopia