EVALUATION OF FINANCIAL PERFORMANCE OF BANKING ENTERPRISES; THE CASE OF CONSTRUCTION AND BUSINESS BANK OF ETHIOPIA
EVALUATION OF FINANCIAL PERFORMANCE OF BANKING ENTERPRISES; THE CASE OF CONSTRUCTION AND BUSINESS BANK OF ETHIOPIA

Summary/Abstract: This study is proposed to evaluated the financial performance of Construction and Business Bank (CBB) of Ethiopia. The study emphasized on financial performance measurement ratios such as asset utilization/efficiency ratios, deposit mobilization, loan performance, liquidity ratio, leverage/financial efficiency ratios, profitability ratios, solvency ratios and coverage ratios to evaluate the bank’s financial performance. For this study, the researchers dominantly relied on secondary data; eight years (2002/2003 to 2009/2010) from most recent audited financial statements of the bank. Primary data was also colleted by the researchers using unstructured personal interview from key officials; the Planning and Business Development manager and the finance section manager and with the aid of observation as well. The data were cross validated with information from secondary sources; eight years financial statements and other relevant records so as to avoid premature conclusions. Findings of the study revealed that the bank’s financial performance had been almost progressing over the operational periods considered for the study. It is concluded after trend analysis that some important financial ratios computed for analysis of the financial performance of the company are in a going up pattern excluding loan deposit ratio, assets turn over ratio and the long term debt to equity ratios. The commendable performance in profitability of the bank is attributable to such factors as, relocation of the some of the banks outlying branches to better bankable areas and the gradual penetration of the bank in to foreign banking activities. The bank achieved significant hike in revenues over the periods while the cost of operation showed only slight increase comparatively with the increase in revenues. The major problems to be cited for the downside performance in some other ratios were resulted from inherited monopolistic operation system of the bank during the command economic system for which the bank failed to take remedial action and subsequently reported significant declines in receivables and failed to keep available resources revolving following the 1991 semi-liberalization economic policy reform by Ethiopian government that invited competitors(private banks) to the market in the areas previously under monopoly by the share company. The insensitivity of responsible financial experts towards timely observation of financial performance measures and remedial actions had also contributed its part.

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