CBE Profit Jumps 76pc, but Impairment Reversal Drives Much of the Gain

The Commercial Bank of Ethiopia (CBE) posted a 75.8 percent increase in net profit for the fiscal year ended June 30, 2025. Still, a large reversal of previously recognised impairment losses played a major role in the improvement.

According to the bank’s audited financial statements, approved on August 10, 2026, CBE’s net profit after tax rose to 38.71 billion birr, from about 22 billion birr a year earlier.

The Audit Service Corporation audited the accounts under International Financial Reporting Standards (IFRS).

The bank’s interest income increased 30.7 percent to 132.06 billion birr, while interest expenses rose only 1.8 percent to 45.31 billion birr. Non-interest income also increased sharply, rising 77.5 percent to 60.52 billion birr.

However, the biggest boost to the bottom line came from a 37.04-billion-birr reversal of impairment losses on financial instruments. CBE had recorded a 9.51-billion-birr impairment provision in the previous year.

According to London-based financial analyst Abdulmenan Mohammed (PhD), the impairment reversal is one of the most important factors behind the bank’s improved performance, making the headline profit growth less straightforward than the 75.8-percent increase suggests.

Forex loss offsets part of the gains

CBE’s results were also affected by the change in Ethiopia’s foreign-exchange regime.

The bank recorded a 36.71-billion-birr loss on foreign-currency transactions, compared with a 2.2-billion-birr gain in the previous year.

Abdulmenan linked the loss to the introduction of a market-based foreign-exchange regime in July 2024.

The sharp swing highlights the financial impact of the birr’s exchange-rate adjustment on banks with substantial foreign-currency exposure.

Assets cross 2 trillion birr

CBE’s balance sheet expanded substantially during the year.

Total assets increased 49 percent to 2.31 trillion birr, from 1.5 trillion birr. Cash and cash equivalents more than doubled, rising 119.3 percent to 424.52 billion birr.

Total deposits increased 44.1 percent to 1.695 trillion birr, while loans and advances rose 22.5 percent to 516.22 billion birr.

Investment in debt and equity securities also increased 45.6 percent to 1.115 trillion birr.

Abdulmenan attributed much of the growth in cash and cash equivalents to the large deposits generated by the National Bank of Ethiopia’s gold purchasing programme. The bank’s securities portfolio also expanded substantially, although the published financial statements did not provide enough itemised detail to establish the precise drivers.

The increase in lending is notable given the tighter monetary environment during the period, although loans grew considerably more slowly than deposits and total assets.

Capital rises nearly fourfold

CBE’s total capital increased to 154.2 billion birr, from 40 billion birr a year earlier.

Part of the increase came from a 54.7-billion-birr rise linked to bonds issued after government legislation to assume bad debts of state-owned enterprises.

Abdulmenan said the remaining capital increase may have been linked to World Bank financing support, although the available disclosures do not provide enough detail to establish the source conclusively.

The sharp increase in capital strengthens CBE’s balance sheet as the bank continues to operate at a scale far larger than its private-sector competitors.

Stronger headline, questions beneath the numbers

CBE’s 2024/25 results show substantial growth in income, deposits, assets and capital. But the composition of the profit increase is important.

The 37.04-billion-birr impairment reversal provided a significant boost, while the bank simultaneously recorded a 36.71-billion-birr foreign-exchange loss.

Operating costs also came under pressure. Staff and other operating expenses more than doubled to 113.71 billion birr, substantially outpacing the growth in interest income.

The figures therefore point to a bank that is expanding rapidly, but with a financial performance shaped by both underlying banking income and significant one-off or valuation-related effects.

CBE has not published the full notes accompanying the auditor’s report, limiting the ability to independently assess the detailed composition of its interest income, impairment reversal and securities portfolio.

For investors, policymakers and competitors, the key question is whether CBE can sustain its higher earnings once the effects of impairment reversals and foreign-exchange adjustments are separated from its recurring banking operations.

Source: Reporter