Ethiopia: Woyanne regime dismisses Commercial Bank president

EthiopianReview.com | November 11th, 2008

By Yohannes Anberbir | Addis Fortune

ADDIS ABABA, ETHIOPIA – The Federal Government sacked Abe Sano, president of the state-owned Commercial Bank of Ethiopia (CBE) last Friday, November 7, 2008.

The government ordered the Public Financial Enterprises Supervisory Agency (PFEA) headed by Eyob Tesfaye (PhD), to replace Abe with his Vice President, Bekalu Zeleke, who had been working under Abe for the last two and half years.

Many were surprised when the then 34-year old Abe Sano was appointed as the youngest top executive in CBE’s 64-year history in January 2006; similarly, his dismissal was equally unexpected among employees of the bank.

“It is the government’s decision,” a senior government official told Fortune.

Abe was appointed to the post following the suicide of his predecessor, Gezahegn Yilma.

Despite a performance that led to improvement within the bank, Abe could not escape the decision by the Revolutionary Democrats to relieve him of his post for reasons yet unknown.

It is under his leadership that the bank’s annual gross profit soared to a record 716 million Br in March 2008 for the first time in CBE’s history. The volume of Non Performing Loans (NPLs) indicated a marked decline to an all time low of 13-15pc from over 50pc four years ago. Abe’s management team achieved these results within one and half years of his appointment.

Further excelling in their achievement, his management managed to lower the NPLs of the bank to the internationally required level of 10pc by the third quarter of the 2007/08 fiscal year. In the second quarter of 2007/08, the bank’s gross profit shot up by 28pc to 1.3 billion Br.

The staggering ratio of 50pc NPLs that the bank registered a few years ago when the International Monetary Fund (IMF) pressured its management to set a target to reduce it to 24pc within two years, significantly declined under Abe. These achievements, however, did not occur within a short period.

For example, despite aggressive campaigns in attempts to recover loans in the years following IMF’s squeeze, CBE did not go any lower than 29.2pc in 2004/05 fiscal year in terms of NPLs.

CBE registered the current healthy level NPLs ratio, even as its lending increased to 15 billion Br within the third quarter of 2007/08, up by 56pc in the same period the preceding year.

This figure represents an amount almost equal to that of loans advanced by all the commercial banks in the country in 2006/07.

Abe told Fortune that he had not yet received any letter officially notifying him of his removal from office, his tone clearly indicating the disappointment that he did not verbally utter.

“He performed remarkably,” a senior government official said. “However, he failed to transform all the branches into the IT age.”

CBE, a 64-year old East African banking giant, has still not installed an electronic banking system, when the younger private Dashen Bank, which has a total capital equivalent to only 10pc of CBE’s, has taken a lead in the industry by harnessing this advanced banking system.

Nevertheless, CBE has been in the process of evaluating and negotiating with international IT firms to install the system that gives depositors 24-hour access to the money in their local or overseas accounts through Automated Teller Machines (ATMs).

The new president, Bekalu, has ousted Abe as the youngest executive appointed to the top most post in CBE as he is only 31 years old.

Bekalu can also be equally credited for the bank’s current performance as he was vice president of the Finance and Accounting Department of the Bank, before becoming Abe’s second in command.

Like Abe, by late Friday the new CBE boss had not yet been officially informed about his promotion to the bank’s highest position.

The oldest commercial bank in Ethiopia, CBE swung into business in 1942 with a 65 million Br capital. That capital has steadily risen to 4.2 billion Br, giving the bank the capacity to lend as much as one billion Birr to a single borrower.

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