Performance of Commercial Banks of Ethiopia and Global Financial Crisis
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Date
2013-05
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Addis Ababa University
Abstract
Commercial banks play a vital role in the economic resource allocation of countries.
Investigating the performance of banks has been one of the more popular topics among
researchers in banking studies. Hence, to contribute to the existing knowledge in
Ethiopia, this study sought to analyze the performance of Commercial banks of Ethiopia
and the impact of Global Financial crisis, using a sample of seven commercial banks
over the period 2004/5-2010/11. The financial performance of the banks measured using
basically CAMEL.. The study found that, during the study period, the performance of
Commercial banks in Ethiopia mainly changes in accordance with NBE directives. The
directives imposed at different time affected all components of CAMEL negatively or
positively. However, regardless the tight monitory directives of NBE their performance
had been improved. During the financial crisis shortage offoreign exchange earnings
significantly reduced commercial banks of Ethiopia ability to meet the foreign exchange
needs of their importing clients adequately. Also interest income from foreign deposit
significantly decreased during the financial crisis. On the other hand, higher gains in
foreign exchange dealings than usual by scoring 6% growth. Total revenue from
international activities and return on asset growth decreased by 39% and 16%
respectively. Also deposit in foreign banks slightly increased by 2%. However these were
not statistically significant.
Keywords: Financial Performance, CAMEL model, Global Financial Crisis
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Keywords
Financial Performance, CAMEL model, Global financial crisis