Ethiopia
Banking sector profile — Sub-Saharan Africa
Data as of October 2026 • TGB Intelligence Unit
Policy rate as of 7 October 2026: 16.00% (source: National Bank of Ethiopia)
Banking sector at a glance
Structure and performance
Ethiopia's banking system consists of 31 commercial banks and one development bank, operating 13,120 commercial bank branches at June 2025. The state-owned Commercial Bank of Ethiopia (CBE) is the only bank classed as large and the sole systemically important institution, holding 49.1% of commercial banking assets, 51.7% of loans and bonds and 48.1% of deposits. Five medium-sized banks hold 29.1% of assets and 25 small banks 21.8%. Twenty-three banks offer interest-free banking, four as full-fledged institutions and 19 through windows.
Commercial bank assets grew 44.5% in the year to June 2025 to ETB 4.74tn, while deposits rose 40.7% to ETB 3.51tn and loans and bonds 38.6% to ETB 3.04tn. Lending is concentrated in trade, which took 41.5% of outstanding loans, while the ten largest borrowers, mainly state-owned enterprises and regional governments, accounted for 12.4%. The July 2024 move to a market-based exchange rate, the interest-rate-based monetary framework adopted the same month and the interbank money market launched in October 2024 have reshaped funding and liquidity management.
Reported soundness indicators are strong. The NPL ratio fell to 3.1% in June 2025, below the 5% regulatory ceiling, although provision coverage declined to 80%. The capital adequacy ratio rose to 19.1%, against an 8% minimum, supported by government-backed recapitalisation of CBE. Net income reached a record ETB 93.4bn in FY2024/25, with return on assets of 2.5% and return on equity of 27.4%. Some banks with high loan-to-deposit ratios continue to face liquidity pressure, eased by the interbank market and the NBE's standing lending facility.
Key risks are exchange-rate depreciation and inflation, which respondents to the NBE's stability survey rank highest. Headline inflation rebounded to 13.4% in May 2026 from 9.7% in December 2025 as fuel supply disruptions linked to the Middle East conflict fed through. Rapid credit expansion, 44.5% year on year in November 2025, prompted a higher reserve requirement and a policy rate increase. Concentration in CBE and competitive pressure on small banks, which the NBE says is prompting smaller banks to consider consolidation, are structural vulnerabilities.
Structural trends
The shifts shaping banking in Ethiopia.
The Banking Business Proclamation No. 1360/2025 of March 2025 opened the sector to foreign investment and introduced resolution and crisis-management regimes for non-viable banks.
Monetary policy has moved to a price-based framework: the NBE policy rate introduced in July 2024 now anchors policy, and the credit growth cap was fully removed in July 2026.
Balance sheets are expanding fast in nominal terms: commercial bank assets rose 44.5% to ETB 4.74tn in the year to June 2025.
Small banks are losing ground: 25 of 31 commercial banks are classed as small, and their asset share fell to 21.8% in June 2025, increasing pressure to consolidate.
Leading institutions
Largest banks in Ethiopia by total assets.
| # | Bank | Total assets (US$) | Type |
|---|---|---|---|
| 1 | Commercial Bank of Ethiopia | US$17.1bn | State-owned |
| 2 | Awash Bank | US$3.3bn | Commercial |
| 3 | Bank of Abyssinia | US$2.1bn | Commercial |
| 4 | Dashen Bank | US$1.9bn | Commercial |
| 5 | Cooperative Bank of Oromia | US$1.5bn | Commercial |
| 6 | Hibret Bank | US$0.8bn | Commercial |
| 7 | Abay Bank | US$0.7bn | Commercial |
| 8 | Zemen Bank | US$0.7bn | Commercial |
Largest banks in Ethiopia by total assets, FY2025 audited accounts. Domestic groups as in the TGB Bank Rankings; other domestic banks from their own audited accounts; subsidiaries of foreign groups shown with their own accounts and marked. Not a ranking table. Converted at official central-bank rates for each fiscal year-end.
Supervision and capital rules
The National Bank of Ethiopia licenses and supervises banks under the NBE Establishment Proclamation No. 1359/2025 and the Banking Business Proclamation No. 1360/2025, promulgated in March 2025, which permits foreign investment in banking and establishes recovery, resolution and crisis-management powers. Implementing directives issued in FY2024/25 cover limits on banks' investments in non-banking businesses (15% of capital in aggregate), recovery planning, and licensing of banks and foreign representative offices, including entry benchmarks for foreign banks. Banks must hold a capital adequacy ratio of at least 8%, keep NPLs below 5% and have paid-up capital of at least Birr 5bn; they also pay deposit insurance premiums. The NBE raised the reserve requirement to 10% in December 2025, abolished the minimum deposit rate and removed the credit cap in July 2026.
What changed in 2026
- In March 2026 the NBE published its Financial Stability Report, showing record commercial bank net income of ETB 93.4bn and an NPL ratio of 3.1% for FY2024/25.
- In March 2026 the Monetary Policy Committee held the policy rate at 15% and retained the credit growth cap, citing inflation risks from the Middle East conflict.
- In May 2026 headline inflation rose to 13.4%, a nine-month high, from 9.7% in December 2025, driven by higher fuel and transport costs.
- In July 2026 the NBE raised its policy rate by one percentage point to 16%, removed the credit cap and introduced targeted reserve requirements linked to banks' loan-to-deposit ratios.
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