ADDIS ABABA, Mar 17 – Ethiopia’s banking sector expanded significantly in the fiscal year ending June 2025, recording its highest-ever profit alongside rapid balance sheet growth, even as the central bank highlighted rising concentration risks within the industry.
The National Bank of Ethiopia released its March 2026 Financial Stability Report on Tuesday, presenting data that show the banking sector expanded sharply in the fiscal year ending June 2025 while posting record earnings.
According to the report, total assets of commercial banks increased 44.5 percent to 4.7 trillion Ethiopian birr. Sector-wide total income rose 78.8 percent to 646.3 billion Ethiopian birr, and net profit after tax climbed 61.3 percent to 93.4 billion Ethiopian birr, the highest annual earnings recorded in the industry’s history.
Capital strength improved markedly, with total capital expanding 63.3 percent to 422.4 billion Ethiopian birr. Liquidity levels also remained robust, as the industry’s liquidity ratio reached 30.4 percent, the highest in five years and well above the regulatory minimum. The central bank said the financial system demonstrated resilience during the transition to a market-based exchange rate and an interest-rate-oriented monetary policy framework, with banks passing key solvency and liquidity stress tests.
Alongside the sector’s expansion, the report documents a shift in market structure. The state-owned Commercial Bank of Ethiopia increased its share of total banking assets to 49.1 percent and accounted for 51.7 percent of outstanding loans and bonds. The central bank described the bank’s performance as stable under supervisory assessments, underscoring its systemic role within the financial system.
“These figures show the bank’s growing market share and reconfirm its position as the only systemically important bank for Ethiopia’s financial system, owing to comprehensive reform activities conducted on the bank,” the bank said in the report.
However, the report noted that the widening performance gap between large and smaller institutions is contributing to higher concentration risks. It indicated that the current market disparity underscores the potential need for consolidation to support competitiveness and maintain stability across the sector.
Smaller and mid-sized private banks face increasing pressure in areas including deposit mobilisation, technology investment and risk management. The rapid growth of digital finance has further altered competitive dynamics. The value of digital payments nearly doubled year on year, exceeding 18.5 trillion Ethiopian birr, reflecting broader adoption of electronic transactions.
While financial inclusion has expanded, with 63 percent of adults holding a financial account, the pace of digitalisation has increased the importance of cybersecurity and operational resilience.
External risks remain prominent. A survey of financial sector stakeholders identified exchange rate movements and inflation as the main short-term concerns. Following the liberalisation of the foreign exchange market in July 2024, the Ethiopian birr depreciated by 151.4 percent against the US dollar as of September 2025, reshaping risk exposure across the banking system.
