Financial Performance Analysis: The Case of Bank of Abyssinia Versus Other Private Commercial Banks in Ethiopia

Abstract

This study entitled ‘Financial Performance Analysis’ was conducted on Bank of Abyssinia. Both the trend and comparative financial performance analysis approaches were used. Five years audited financial reports from 2005 to 2009 of the private commercial banks were taken for analysis purpose. So far, most researches have tried to assess the growth of private banks relative to state-owned banks in terms of asset ownership and loan granting ability. But this paper has tried to assess whether the private commercial banks are financially sound or not by specifically considering only the private commercial banks and by taking Bank of Abyssinia as a case study. The objective of the study is to evaluate the financial performance of Bank of Abyssinia by analyzing its past five year’s performance trend and comparing the financial performance of the bank with other private commercial banks operating in Ethiopia (United Bank, Wegagen Bank and Nib International Bank). Financial ratios were considered to measure the credit quality, liquidity, efficiency and profitability as well as sustainability (financial and operating) of the private commercial banks. In both the financial performance analysis approaches i.e., the trend and comparative analysis, Bank of Abyssinia’s financial performance showed that weak performance has been reported continuously in all the financial ratios (Profitability, Liquidity, Risk and Solvency Efficiency and credit quality ) taken for analyzing the financial performance.