FIVE YEARS 2010 11 to 2014 15 STRATEGY IMPLEMENTATION PERFORMANCE REPORT(1).pptx

Strategy

1. Corporate Strategy Implementation- Assessment Report [2010/11-2014/15] COMMERCIAL BANK OF ETHIOPIA

2. CORPORATE STRATEGY IMPLEMENTATION ASSESSMENT 2010/11-2014/15 OBJECTIVES OF THE REPORT IS TO: Highlight the major accomplishments of the Bank During the strategy period; Identify the challenges and weaknesses in implementing the corporate strategy, and Identify critical issues for the upcoming strategy formulation.

3. CORPORATE STRATEGY IMPLEMENTATION ASSESSMENT 2010/11-2014/15 Background: Business Process Reengineering: Conducted and Implemented Evaluate Balanced Score Card Strategy formulation and implementation

4. CORPORATE STRATEGY IMPLEMENTATION ASSESSMENT 2010/11-2014/15 Background: Vision; “ To became a world-class commercial bank by the year 2025 ” Strong Financial Position and Enhanced Developmental Partnership ; Stakeholder Responsiveness ; Process Efficiency and Effectiveness; Motivated and Proficient Employees;

5. CORPORATE STRATEGY IMPLEMENTATION ASSESSMENT 2010/11-2014/15 Background: The Building and implementation of the BSC follows a nine step approach: Step I: Organizational Assessment, Step II: Strategy Development, Step III: Strategic Objectives, Step IV: Strategy Map Step V: Performance Measures and Targets, Step VI: Strategic Initiatives, Step VII: Performance Information System, Step VIII: Cascading, Step IX: Evaluation.

6. CORPORATE STRATEGY IMPLEMENTATION ASSESSMENT 2010/11-2014/15 Background: Strategic Perspectives of the Bank Financial and Developmental : Customer : Internal Business Process :  Learning and Growth :

7. CORPORATE STRATEGY IMPLEMENTATION ASSESSMENT 2010/11-2014/15 Background: The strategic themes of the Bank are: Business Growth: Increase market share out of the growing economy; Retain its industry leadership; Meet the dynamic expectation of Government and customer Service Excellence : to mobilize funds/public resources and channel towards developmental ventures, the bank should exceed customers expectations,

8. CORPORATE STRATEGY IMPLEMENTATION ASSESSMENT 2010/11-2014/15 Strategy Objective: Perspective Objective Financial and Developmental Ensure Sustainable Profitability Ensure Financial Soundness Enhance Developmental Financing Increase Volume of Fund Customer Maximize Customer Satisfaction Internal Business Process Improve Accessibility of Services Improve the Bank’s Image Improve Process Efficiency Strengthen Relationship with Developmental Partners Improve Market Understanding Improve Risk Management

9. CORPORATE STRATEGY IMPLEMENTATION ASSESSMENT 2010/11-2014/15 Strategy Objective: Perspective Objective Learning and Growth Increase Employee Satisfaction Enhance Information Systems Improve Human Resource Development Improve Organizational Culture Enhance Internal Communication

10. CORPORATE STRATEGY IMPLEMENTATION ASSESSMENT 2010/11-2014/15 Strategy Initiatives Finalize the IT Projects; Institute Integrated HR Development and Management Program; Upgrade Customer Relationship Management System; Introduce Effective Cost Capturing System ; Undertake Internal Benchmarking and Scale up best Practices ; Design and Implement Deposit and FCY Enhancement Programs; Standardize the Physical office Environment;

11. CORPORATE STRATEGY IMPLEMENTATION ASSESSMENT 2010/11-2014/15 Strategy Initiatives Standardize Customer Satisfaction and SDT Measurement System; Execute Service Outsourcing Option; Conduct Corporate Values Audit; Undertake Process Improvement; Improve the Risk Management Capability of the Bank

12. CORPORATE STRATEGY IMPLEMENTATION ASSESSMENT 2010/11-2014/15 PARTICULARS 2009/10 Base Line 2010/11 2011/12 2012/13 2013/14 2014/15 Average annual growth rate DEMAND 33,276 53,840 72,982 92,660 102,608 118,713 30.1 PRIVATE DEMAND 11,491 19,823 27,239 31,168 37,798 44,762 32.8 SAVING 21,816 31,096 41,903 53,164 81,041 109,492 38.3 TIME 989 1,563 7,310 8,705 9,671 13,527 99.2 GRAND TOTAL 56,081 86,499 122,195 154,529 193,320 241,732 34.4 Growth rate 54% 41.3% 26.4% 25.2% 25% FINANCIAL AND DEVELOPMENTAL PERSPECTIVE Strategic Objective 1: Increase volume of Fund 1.1. TRENDS IN DEPOSIT POSITION BY TYPE In millions of Birr

13. CORPORATE STRATEGY IMPLEMENTATION ASSESSMENT 2010/11-2014/15 PARTICULARS 2009/10 Base Line 2014/15* Five Years Plan (2) %age Accomplishment 3=1/2*100 DEMAND 33,276 118,713 119,628 99.2 PRIVATE DEMAND 11,491 44,762 -   SAVING 21,816 109,492 66,435 164.8 TIME 989 13,527* 2,436 555.3 GRAND TOTAL 56,081 241,732 188,500 128.2 1.2. Deposit Position Performance by Type In millions of Birr

14. CORPORATE STRATEGY IMPLEMENTATION ASSESSMENT 2010/11-2014/15 Fig.1: Deposit Position by Type Millions Birr

15. CORPORATE STRATEGY IMPLEMENTATION ASSESSMENT 2010/11-2014/1 Deposit by Type Percentage Share of 2009/10 Deposit by Type Percentage Share of 2014/15

16. CORPORATE STRATEGY IMPLEMENTATION ASSESSMENT 2010/11-2014/15 1.3. TRENDS IN DEPOSIT POSITION BY OWNERSHIP In millions of Birr PARTICULARS 2009/10 Base Line 2010/11 2011/12 2012/13 2013/14 2014/15 Five Years Plan Average annual growth rate PRIVATE 33,553 51,103 69,347 84,958 119,863 158,585 125,577 36.8% PUBLIC 6,866 12,189 20,986 26,741 30,163 31,564 25,280 38.9% COOPERATIVES 2,331 3,112 3,819 3,873 4,153 4,068 9,518 12.6% GOVERNMENT 13,331 20,094 28,043 38,957 39,142 47,515 28,049 30.2% GRAND TOTAL 56,081 86,499 122,195 154,529 193,321 241,732 188,424 34.4% Private Growth rate 52.3% 35.8% 22.6% 41.1% 32.3% 36.8%

17. CORPORATE STRATEGY IMPLEMENTATION ASSESSMENT 2010/11-2014/15 Fig.2: Deposit Position by Ownership Millions Birr

18. CORPORATE STRATEGY IMPLEMENTATION ASSESSMENT 2010/11-2014/15 Deposit Position by Ownership Percentage Share 2009/10 Deposit Position by Ownership Percentage Share 2014/15

19. CORPORATE STRATEGY IMPLEMENTATION ASSESSMENT 2010/11-2014/15 1.4. Deposit Market Share Item (%) 2009/10 Baseline 2010/11 2011/12 2012/13 2013/14 Total Deposit 57 62 65 65 67 Saving 45 48 51 50 54 Demand 72 76 79 80 81 Time 22 33 58 58 49

20. CORPORATE STRATEGY IMPLEMENTATION ASSESSMENT 2010/11-2014/15 The Basic Points of the deposit results: Deposit mobilization strategy initiative design and implemented The Total deposit reached Birr 241.7 billion, exhibiting an incremental deposit of Birr 185.6 billion. This means 76% of the total deposit of the Bank has been mobilized within the last five years. The overall percentage share of demand deposit has reduced from 59.3% to 49.1% of the total during these five years The private demand deposit depicted almost four fold growth against the baseline Saving deposit has also grown in proportional share from total deposit from 38.9% to 45.3 %

21. CORPORATE STRATEGY IMPLEMENTATION ASSESSMENT 2010/11-2014/15 The Private and individual category reached Birr 158.6 billion, growing by four and half fold from the baseline, The private and individual deposit share grew out of the total deposit from 59.8% to 65.6%. The bank maintained more than 65% of the industry’s total deposit volume. The bank’s deposit market share data signify that over the specified period not only the deposit volume but also the market share has increased. The market share growth is obtained through reaching the unbanked by expanding accessibility (not snatching from existing customer base of the industry)

22. CORPORATE STRATEGY IMPLEMENTATION ASSESSMENT 2010/11-2014/15 2. FCY EARNINGS In millions of USD Particular 2009/10 Baseline 2010/11 2011/12 2012/13 2013/14 2014/15 Aver. Annual Growth rate Export 657.0 1,041.0 1,274.0 1,071.0 1,126.1 972.8 11.3% Remittance 2,013.3 3,060.0 3,627.4 3,740.9 4,406.0 4,787.0 20.0% FCY Purchase 925.9 456.6 462.9 318.1 416.8 300.0   1,134.4 1,364.5 1,323.2 1,478.0 1,632.7   9.9% Service Receipts Private Transfers 778.0 914.0 1,183.4 1,600.1 1,852.3 1,973.1   20.9% Official Transfers 309.4 555.0 616.6 499.5 658.9 881.2   27.4% Total Inflow 2,670.3 4,101.0 4,901.4 4,811.9 5,532.1 5,759.8 18.1% Growth rate 53.6% 19.5% (1.8%) 15% 4.1%

23. CORPORATE STRATEGY IMPLEMENTATION ASSESSMENT 2010/11-2014/15 2. FCY EARNINGS In millions of USD Particular 2009/10 Baseline Five Years Total Five Years plan Accom . Level % Export 657.0 5,484.9 8,312 66% Remittance 2,013.3 19,462.4 19,854 98% Total Inflow 2,670.3 24,947.3 28,166 89%

24. CORPORATE STRATEGY IMPLEMENTATION ASSESSMENT 2010/11-2014/15 Fig 3:FCY EARNINGS Millions USD

25. CORPORATE STRATEGY IMPLEMENTATION ASSESSMENT 2010/11-2014/15 Basic points on Foreign Currency Earning Result The Total FCY earned reached USD 24.9 billion, exhibiting an achievement level of 89%. The annual FCY earning potential of the Bank reached USD 5.6 billion in 2014/15, which is more than two fold when compared to the base figure of USD 2.7 billion. Throughout the five years, the FCY earnings from private transfers had shown continuous increment and reached two and half fold of the baseline The total export earning has been below the intended target (66%)

26. CORPORATE STRATEGY IMPLEMENTATION ASSESSMENT 2010/11-2014 /15 3. TERM LOAN AND BOND COLLECTION In millions of Birr Particulars 2009/10 Baseline 2010/11 2011/12 2012/13 2013/14 2014/15 Five Years Total Five Years plan Accomp . % Term Loans 8,980 10,156 15,683 29,970 31,883 33,231 120,923 51,377 235.4 Bonds 1,254 7,424 4,822 8,856 6,316 9,932 37,350 22,723 164.4 Total 10,234 17,581 20,505 38,826 38,199 43,163 158,274 74,100 213.0

27. CORPORATE STRATEGY IMPLEMENTATION ASSESSMENT 2010/11-2014/15 Strategic Objective 2: Enhance Developmental Financing 2.1Loan and Bond Disbursement In million of Birr TERM LOAN AND BOND DISBURSEMENT In millions of Birr Particular 2009/10 Baseline 2010/11 2011/12 2012/13 2013/14 2014/15* Five Years Total Five Years plan Acc. % Term Loan 10,351 17,780 37,373 34,632 45,824 45,031 180,640 54,909 328 Private 4,622 4,919 8,696 6,956 11,136 10,132 41,838 - Public 4,967 11,946 27,813 26,839 33,321 33,713 133,632 - Coop. 762 915 864 837 1,367 1,186 5,196 - Bond 8,936 18,167 23,501 21,875 33,200 44,550 141,293 116,932 120 Total 19,287 35,947 60,874 56,507 79,024 89,581 321,933 171,841 187 Growth 86.4% 69.3% (7.2%) 39.8% 13.4% 40.4%

28. CORPORATE STRATEGY IMPLEMENTATION ASSESSMENT 2010/11-2014/15 2.2 LOAN AND BOND OUTSTANDING In millions of Birr Particular 2009-10 Baseline 2010/11 2011/12 2012/13 2013/14 2014/15 Average Growth Rate Loans & advances 22,859 35,980 62,314 70,432 89,665 111,435 39% Private 9,952 13,628 18,816 19,898 26,657 32,532 27.2% Public 10,879 18,381 37,721 47,886 60,672 76,789 50.9% Coper . 2,029 2,208 1,790 2,649 2,336 2,114 3.2% Bonds 27,718 40,239 63,437 83,055 114,015 153,930 41% Grand Total 50,577 76,219 125,751 153,487 203,680 265,365 40% Average Growth 50.2% 65.1% 22% 32.7% 30.3% 40%

29. CORPORATE STRATEGY IMPLEMENTATION ASSESSMENT 2010/11-2014/15 Fig 4: LOAN AND BOND OUTSTANDING Millions of Birr

30. CORPORATE STRATEGY IMPLEMENTATION ASSESSMENT 2010/11-2014/15 2.3. Market Share of CBE’s Loans & Adv (Excluding Bond) Item Percentage share of Loans & Adv. 2009/10 Baseline 2010/11 2011/12 2012/13 2013/14 2014/15 % Share 42.3 % 46 % 53% 52% 53% 60% Private Loan 45% 39.7% 32.2% 28.3% 29.7% 29.2% Public Loan 48% 53.8% 64.7% 68% 67.7% 68.9% Cooperatives Loan 7% 6.5% 3.1% 3.7% 2.6% 1.9%

31. CORPORATE STRATEGY IMPLEMENTATION ASSESSMENT 2010/11-2014/15 Basic points on Loan and disbursement The Total loan and bond disbursement for the last five years reached Birr 321.9 billion, exhibiting an achievement level of 187%. The public sector have taken 85.4 % (Birr 275 Billion) of the total disbursement. The total credit outstanding stood at Birr 265.4 billion which is more than five fold when compared to the base figure of Birr 50.6 billion The Public outstanding credit share grew out of the total credit from 72% (birr 30.8 billion) to 87.1% (230.7 billion) . The bank maintained 60% of the industry’s total loans and advance volume (excluding Bond). The bank’s loans and advances market share data signify that over the specified period not only the loan and advance volume but also the market share has increased (from 42.3% to 60% )

32. CORPORATE STRATEGY IMPLEMENTATION ASSESSMENT 2010/11-2014/15 Basic points on Loan and disbursement CBE Provide finance for: EEPs Projects (mainly for Renaissances and Gibe III) Birr 98.5 Billion; Fertilizers import Birr 44 billion; Sugar projects Birr 38.5 billion; Sugar import Birr 4 billion; Housing Projects Birr 29 billion; Rail way Projects Birr 13 billion; Edible oil Birr 23 billion; Wheat import Birr 11.6 billion; Chemical Industry Birr 4.3 billion

33. CORPORATE STRATEGY IMPLEMENTATION ASSESSMENT 2010/11-2014/15 2.4. FCY PAYMENT BY SECTOR In millions of USD Particular 2009/10 Baseline 2010/11 2011/12 2012/13 2013/14 2014/15* Five years Total Amount Average Share (%) 1. Total Import (A+B) 3,361 3,661 6,429 5,846 6,190 6,661 28,787 93.0 A. Public Imports 3,158 5,423 5,004 4,642 4,783 23,011 67 Major Projects 873 2,008 1,243 938 1,200 6,262 17 Other Public Projects 2,285 3,415 3,761 3,704 3,584 16,749 50 B. Private Imports 504 1,006 842 1,548 1,878 5,778 26 2. Transfers 268 428 218 197 239 1,350 3.3 3. Others 521 295 197 232 281 1,526 3.7 Total Payments 3,361 4,450 7,151 6,261 6,619 7,181 31,662 100

34. CORPORATE STRATEGY IMPLEMENTATION ASSESSMENT 2010/11-2014/15 Basic points on Foreign Currency Payment The annual FCY Payment of the Bank reached USD 7.2 billion in 2014/15, which is more than two fold when compared to the base figure of USD 3.4 billion. The public sector got an average of 74% FCY payment during the strategic period Private sector (including fertilizer import) take 26%

35. CORPORATE STRATEGY IMPLEMENTATION ASSESSMENT 2010/11-2014/15 Basic points on Foreign Currency Payments CBE Provide FCY for: Fuel USD 10.2 billion EEPs Projects (mainly for Renaissances and Gibe III) USD 2.4 Billion; Sugar projects USD 548.8 million; Sugar import USD 223.4 million Housing Projects USD 180.8 million; Rail way Projects USD 523.5 million; Wheat import USD 400 million; Edible Oil Import USD 1.2 billion; Fertilizer USD 1.9 billion METEC USD 1.6 billion Ethio Telecom USD 888.6 million

36. CORPORATE STRATEGY IMPLEMENTATION ASSESSMENT 2010/11-2014/15 Strategic Objective 3: Ensure Sustainable Profitability 3.1 Profit Before Tax Millions Birr Particular 2009-10 Baseline 2010/11 2011/12 2012/13 2013/14 2014/15 Average Growth Rate Profit Before Tax 3,197 4,172 7,891 8,424 9,686 12,664 34.4% Total Income 4,860 7,174 11,458 13,492 17,194 22,868 37.1% Total Expenses 1,663 3,003 3,567 5,068 7,509 10,204 45.1% Proportion of Interest Income 56.4% 56.9% 58.5% 70.3% 73.2% 73.3% - Year on year profit growth 18% 30.4% 89.2% 6.8% 15% 30.7% 34.4%

37. CORPORATE STRATEGY IMPLEMENTATION ASSESSMENT 2010/11-2014/15 Strategic Objective 3: Ensure Sustainable Profitability 3.1 Profit Before Tax Millions Birr Particular 2009-10 Baseline Five Years Total (1) Five Years plan (2) Accom . % (3=1/2*100) Profit Before Tax 3,197 42,837 25,829 166% Total Income 4,860 72,186 42,518 170% Total Expenses 1,663 29,351 16,690 176%

38. CORPORATE STRATEGY IMPLEMENTATION ASSESSMENT 2010/11-2014/15 Fig 5: Profit Before Ta x Millions Birr

39. CORPORATE STRATEGY IMPLEMENTATION ASSESSMENT 2010/11-2014/15 Strategic Objective 4: Ensure Financial Soundness 4.1. Return on Asset and Return on Equity Particulars Standard 2009-10 Baseline 2010/11 2011/12 2012/13 2013/14 2014/15 Five Years Plan Return On Asset (ROA) >1 4.2 4.4 5.9 4.8 4.4 5.1 3.8 Return on Equity (ROE) >13 53.5 70.7 114.1 101.2 98.0 132.6 87.6

40. CORPORATE STRATEGY IMPLEMENTATION ASSESSMENT 2010/11-2014/15 4.2. TOTAL ASSET In Billions of Birr Particular 2009-10 Baseline 2010/11 2011/12 2012/13 2013/14 2014/15 Five Years Plan 2014/15 Cash & Balances With NBE 10.8 15.8 14.6 26.5 14.1 20.1 44.5 Government Securities 4.8 2.7 2.4 2.4 1.6 1.2 1.5 Deposit With Other Banks 3.3 14.3 6.9 11.8 17.1 3.6 3.7 Loans and Advances to Customers 22.2 33.1 56.4 68.1 86.9 111 27.1 Loans and Advances to Banks 0.3 0.2 0.5 0.5 0.4 0.5 0.3 Investment 27.7 40.5 62.0 80.7 110.5 153.3 126.4 Property & Equipment (net) 0.6 0.8 0.8 1.0 1.6 2.0 1.3 Intangible Assets (net) - - - 0.1 0.08 .02 Other Assets 4.5 6.7 11.7 7.3 10.5 14.8 4.9 Total Assets 74.2 114.1 155.3 198.4 242.4 303.6 209.7

41. CORPORATE STRATEGY IMPLEMENTATION ASSESSMENT 2010/11-2014/15 4.3 Status of NPLs In Millions of birr Particulars 2009-10 Baseline 2010/11 2011/12 2012/13 2013/14 2014/15 Substandard 73 56 211 1,242 205 770.3 Doubtful 46 9 31 74 158 415 Loss 279 228 188 251 933 802.6 Total NPLs 398 293 430 1,567 1,296 1,987.9 Total Loans & Adv. 22,859 34,217 58,327 70,432 89,665 111,435 NPL Ratio 1.7 0.9 0.7 2.2 1.4 1.8% NPL Plan 1.2% 1.14% 1.08% 1.02% 1%

42. CORPORATE STRATEGY IMPLEMENTATION ASSESSMENT 2010/11-2014/15 2. Customer Perspective Strategic Objective 5: Maximize Customer Satisfaction Independent external consultants conducted customer satisfaction survey in 2011/12 FY and the Bank got 84% customer satisfaction score. Since 2012, the Bank has been conducting customer satisfaction survey on yearly basis using in house capacity. During the plan period the Bank has undertaken various customer service enhancement initiatives. Such as: Implementing one window service and the related improvement in service delivery time, Development and periodic revision of clear operational procedures , Introducing technology services such as ATM, POS, Mobile banking and Internet Banking Branch accessibility, and In placing the customer complaints management system.

43. CORPORATE STRATEGY IMPLEMENTATION ASSESSMENT 2010/11-2014/15 Customer Satisfaction Survey result Comparison Factors 2012 2013 2014 2015 Service Delivery Speed 76 79.7 61 85.4 Staff Knowledge of the Bank’s services 95.8 85.7 80 88.6 Staff response to Customer enquires 58.9 72.7 79 83.7 Bank Services prices 73.6 81 80 67 Branch neatness and office seize 70.7 74.6 69 77.8 Service Equity level of the Bank 68.7 80.7 74 83.7 Overall Satisfaction Level 84 75.4 76.6 83.5

44. CORPORATE STRATEGY IMPLEMENTATION ASSESSMENT 2010/11-2014/15 3. INTERNAL BUSINESS PROCESS PERSPECTIVE Strategy Objective 6: Improve Accessibility of Services 6.1 Branch opening Fig 6: Number of New and Total Branches

45. CORPORATE STRATEGY IMPLEMENTATION ASSESSMENT 2010/11-2014/15 The branch opening strategy in urban and rural towns of the country has been quite aggressive since 2010/11. The Bank was able to open 149 branches on average per year during the five years [against annual target of 100 branches per year] and mobilized on average Birr 2.1 billion deposits per year from these newly opened branches.   The total number of branches of the Bank reached 965 at the end of June 30, 2015. A total of 745 branches were opened during the last five years under review, which is more than threefold from the baseline number of branches. In other words, 77% of branches have been opened within the five years.

46. CORPORATE STRATEGY IMPLEMENTATION ASSESSMENT 2010/11-2014/15 6.2 Customer Base Expansion Fig 7: Number of Deposit Accounts ‘000 Birr Account number increased From 2.2 million base to 10.6 at the end of June 30, 2015 On average, the Bank has been opening 1.7 million new deposit accounts each year during the five years under review.

47. CORPORATE STRATEGY IMPLEMENTATION ASSESSMENT 2010/11-2014/15 6.3 E-Banking Number of ATM & POS machines and card User Particular 2009/10 Base Line 2010 / 11 2011/12 2012/13 2013/14 2014/15 No of ATM Machines 8 42 58 258 433 644 No of POS Machines - - - 206 244 1,886 No of ATM & VISA card Users 15,000 28,945 61,040 300,470 973,762 1,604,363

48. CORPORATE STRATEGY IMPLEMENTATION ASSESSMENT 2010/11-2014/15 MOBILE AND INTERNET BANKING USERS Particular 2012/13 2013/14 2014/15 No of mobile banking users 9,236 110,676 458,909 No of internet banking users 215 6,366 7,838

49. CORPORATE STRATEGY IMPLEMENTATION ASSESSMENT 2010/11-2014/15 Strategy Objective 7: Improve the Bank’s Image The Bank actively involved in supporting national development priorities by financing mega projects and also strives to manage the financial resources responsibly and transparently. The Bank had also involved in various donation and sponsorship activities that benefit various organizations and individuals. The overall reputation index (the bank’s measure of public image) is maintained in a good reputation status. The corporate strategy set to increase the reputation index 5% annually from the baseline position. The overall reputation survey result is around 76%. (customer 83% and non customer 71%) Considering age 14 – 24 age group the result is 82%

50. CORPORATE STRATEGY IMPLEMENTATION ASSESSMENT 2010/11-2014/15 Reputation Index Survey result % Parameters 2012 2013 2014 2015 Quality of Product 63 65.8 71.8 79 Financial Strength 70 71.2 69.2 79 Social Responsibility 49.5 60.7 65.7 70 Attractive 60.3 62 71.8 69 Likability 71 72.8 75.2 81 Overall result 63.1 67.7 71.8 76

51. CORPORATE STRATEGY IMPLEMENTATION ASSESSMENT 2010/11-2014/15 Strategy Objective 8: Improve Process Efficiency The implementation of the core banking system had improved the performance of the core processes by changing the way they operate. In relation to this the core processes CATS, Credit, Trade Services and Finance revisited their work flows and related policies and procedures in alignment with the new core Banking system implemented. The support processes also updated their policies and procedures in alignment with the changing business requirements. Best practices and strategy implementation learning points especially in the priority focus areas of the Bank had been continuously shared among districts and branches during the past five years.  

52. CORPORATE STRATEGY IMPLEMENTATION ASSESSMENT 2010/11-2014/15 St rategy Objective 9: . Strengthen Relationship with Developmental Partners Most districts and branches have made a regular discussion meeting with the local administrators. They work together especially in deposit mobilization strategy implementation. The top management had also making regular discussions with higher level regional and Zonal administrators and institutions on selected partnership issues. Exporters, money transfer organizations (MTO) and depositors are among the major partners for the realization of the Bank’s strategy. Annual depositors’ day has been celebrated and influential exporters and MTO that work with the Bank recognized and honored for their contributions to the bank and the nation . The corporate strategy set to increase the satisfaction level by 10% annually from the baseline position for the first two year and 5% for the last two year. The 2014/15 development partners’ satisfaction level is reached 92%; from the baseline figure of 76%.

53. CORPORATE STRATEGY IMPLEMENTATION ASSESSMENT 2010/11-2014/15 Developmental Partners Satisfaction Survey Comparison Factors 2011 2012 2013 2014 2015 Efforts towards supporting national Development endeavors 96 92 88 94 Bank’s management and other employee accessibility and responsiveness 60 72 84 94 92 Level of support request presented and extended to partners 68 69 61 63 81 Level of transparency 96 95 90 Level of information exchange between the Bank and its development partners 95 93 85 Overall satisfaction result 76 88 77 82 92

54. CORPORATE STRATEGY IMPLEMENTATION ASSESSMENT 2010/11-2014/15 Strategy Objective 10: Improve Market Understanding A number of studies that aim at grasping the market and industry’s trends have been conducted and important lessons have been drawn. Some of the studies were: Introducing prize linked saving program Introduce new products (interest free banking; women and youth) The Competition in the Ethiopian Financial Industry, The Profitability of the Banking Industry in Ethiopia, The Saving Potential of Selected CBE Districts, Deposit Volatility of the Banking Industry, Customers’ Technology Service Utilization particularly Mobile Banking, Quarterly, Global and Domestic socioeconomic assessment reports are prepared and their implications to the Bank are distributed to processes and districts. Corporate, Process, District and Branch plan revisions have been made especially based on periodic performance analysis and market prospective.

55. CORPORATE STRATEGY IMPLEMENTATION ASSESSMENT 2010/11-2014/15 Strategy Objective 11: Improve Risk Management Particulars NBE ReQ. and Internat. Standard 2009-10 Baseline 2010/11 2011/12 2012/13 2013/14 2014/15 Five Year Plan Liquidity Risk Liquid Asset to total Deposit >15 27.0 34.9 19.6 26.3 17 10.4 25.6 Total Loan & Bonds to Deposit - 96.1 89.2 100.3 99.2 104.2 110.6 82.5 Capital Adequacy Ratio (RW) >8 17.0 11.5 11.2 13.4 12.9 13.2 22.4 Credit Risk Total Loans and Advances to Total Assets 30.8 30.0 37.5 35.5 36.9 38.5 - Provisions to Loans Outstanding 1.9 2.6 2.4 2.7 2.7 2.6 - NPLs to Total Loans & Advances <5 1.7 0.9 0.7 2.2 1.4 1.8 1

56. CORPORATE STRATEGY IMPLEMENTATION ASSESSMENT 2010/11-2014/15 Basic points on Risk Management The Bank’s loan and bonds to deposit ratio has reached 110.6 % and fell high risk zone. Liquid Asset to total Asset (10.4) below the NBE standard (15)

57. CORPORATE STRATEGY IMPLEMENTATION ASSESSMENT 2010/11-2014/15 4. LEARNING AND GROWTH PERSPECTIVE Strategy Objective 12: Increase Employee Satisfaction In 2011/12 Employee satisfaction survey was conducted by external consultants and a baseline figure of 40.4% satisfaction level was found. The overall employee satisfaction result in 2013/14 FY and 2014/15 stood at 74.1% and 64% respectively. The Bank implemented a comprehensive human resource development strategy and introduced competitive salary scale and benefit package which contribute to improve employees overall satisfaction level. Although the overall satisfaction level had comparatively increased from the baseline, close follow-up and adjustments are needed regarding selection of trainees, promotion, internal communication, employee performance measures and availability of the required equipment. In 2012/13 Employee engagement survey was conducted by FSFM and a baseline figure of 65% engagement level. The engagement level in 2014/15 is 73%

58. CORPORATE STRATEGY IMPLEMENTATION ASSESSMENT 2010/11-2014/15 Employee Engagement Survey Comparison Factors 2012/13 2014/15 Working Environment 42.7 73.6 Recognition and Reward 36 62 Career Development 60 64 Understanding of work Expectations 80 82.7 Employee Commitment 76.1 86 Focus on Quality 82 86.1 Compensation and Benefit 32.9 52.9 Satisfaction with Current Role 70.8 73 Overall Engagement 65 73

59. CORPORATE STRATEGY IMPLEMENTATION ASSESSMENT 2010/11-2014/15 Strategy Objective 13: Improve Organizational Culture The 2013/14 FY survey demonstrated that the understanding level of the corporate values by employees has improved from 62% in 2010/11 to 69% in 2013/14 FY and drop to 65% in 2014/15.  The last five years’ overall corporate value audit survey revealed inconsistency in the year on year results. However, employees’ understanding for most corporate values has been continuously improved. As the 2014/15 survey depicted individual corporate values like Integrity, Corporate Citizenship and Public Confidence are the values most commonly known by more employees implying customers would receive better customer service.

60. CORPORATE STRATEGY IMPLEMENTATION ASSESSMENT 2010/11-2014/15 Corporate Value Survey Value 2011 2012 2013 2014 2015 Corporate Citizenship 24 50 53 68 87 Customer Satisfaction 93 80 62 72 59 Quality Service 55 93 59 72 65 Innovation 63 65 54 66 42 Employees 77 74 57 72 53 Team Work 70 77 57 76 58 Integrity 20 61 56 63 74 Pubic Confidence 93 65 55 64 74 Overall Corporate value 62 71 57 69 65

61. CORPORATE STRATEGY IMPLEMENTATION ASSESSMENT 2010/11-2014/15 Strategy Objective 14: Enhance Internal Communication A corporate intranet (portal) system is instituted to exchange work related information electronically. CBE Informer is publicized every two months and provides major corporate updates. Employees quarterly discuss the corporate and their units’ performance in order to increase their understanding of the overall status of the bank. The bank conducted annual internal communication survey to find out the effectiveness and accessibility of strategic and work related information to all employees. The five years’ survey result showed inconsistent results during the period. The latest (2014/15) communication rating showed 52.4% satisfaction level.

62. CORPORATE STRATEGY IMPLEMENTATION ASSESSMENT 2010/11-2014/15 Strategy Objective 15: Enhance Information System Finalizing IT Projects IT Infrastructure project implemented The Card Banking system implemented Integrated Banking Solution (CORE Banking) The Branches under the Core-Banking system had reached 856 Internet banking Mobile banking

63. CORPORATE STRATEGY IMPLEMENTATION ASSESSMENT 2010/11-2014/15 Strategy Objective 16: improve Human Resource Development A comprehensive HRD strategy had been developed by FSFM Implementation pursued under different programs 1. Learning and Development Competency gap analysis and training need assessment conducted Competency directory prepared for all processes Based on the training need assessment, a training curriculum developed FSFM, Crown agents, KPMG and the AAU School of Commerce had also finalized agreement with the bank to provide the developmental trainings

64. CORPORATE STRATEGY IMPLEMENTATION ASSESSMENT 2010/11-2014/15 Large developmental and technical trainings are provided employees L&D metrics are developed to evaluate the efficiency and effectiveness of learning and development activities Specification is prepared to develop a database for storing training records; Internal trainers have been identified and capacity building is done by offering ToT training and through experience sharing while external trainers are conducting training sessions ; Successors are being trained and the Bank’s base of external training vendors is being expanded.

65. CORPORATE STRATEGY IMPLEMENTATION ASSESSMENT 2010/11-2014/15 2. Succession Planning and carer Management System Talent Management Committee established Critical jobs are identified successors’ eligibility criteria had been developed in consultation with the FSFM Consultants Four pool of successor have been created Individual Development Plan (IDP) of the first phase of the succession scheme had been conducted Promotion has been linked with Succession pools

66. CORPORATE STRATEGY IMPLEMENTATION ASSESSMENT 2010/11-2014/15 3. Performance Management System (PMS) Using BSC Model, team evaluation has been Started in 2011 Pilot test of Employee performance management system has been started in 2013 Line managers trained In 2014 EPM rollout has been started Implementation and follow-up is underway at most of processes and branches

67. CORPORATE STRATEGY IMPLEMENTATION ASSESSMENT 2010/11-2014/15 MAJOR WEAKNESSES AND CHALLENGES DURING THE PERIOD (2010/11-2013/14) Human Resources Skill and Competency gap Liquidity Mismatch and Demand and Supply Gap Organizational Structure Physical Resource Management Under capitalization Inconsistent Customer Service Quality Telecommunication and Power Supply Fragmented Offices at Head Office and Districts Malpractices in the industry particularly on Exports, FCY purchases and incoming foreign transfers

68. CORPORATE STRATEGY IMPLEMENTATION ASSESSMENT 2010/11-2014/15 The way forward Based on the five year corporate strategy review, during the upcoming period our commitments would specifically include:  Sustaining the financial resource mobilization effort to respond to demand side pressures; Strengthening the risk management Expanding the accessibility strategy in order to increase the financial inclusion of the public; Expediting the complete implementation of the HRD strategy ; Supporting the private sector through increased loan disbursement and FCY provision, and Improving the quality and efficiency of customer service.  

69. Thank You