Sbi Set To Steer Ethiopian Bank On Fee Basis For 5 Years

The State Bank of India (SBI) is close to inking a deal with Commercial Bank of Ethiopia (CBE) to run it for 3-5 years. The state-owned CBE is the largest one in Ethiopia with an asset base of over $3 billion. It has over 171 branches and accounts for over 80 per cent of the country's total deposits.

According to the terms of the proposed deal, a senior SBI executive will be nominated as CEO of the Ethiopian bank and a team of SBI executives will put in place the business plan, as well as systems and procedures at the bank.

 

Confirming the development, an SBI source said: "There are a few conditions which need to be fulfilled. The final details are being worked out. The two sides are expected to sign the deal soon."

Once the deal is signed, this will be the second instance of SBI bagging a management contract for an international bank. Earlier, it had bagged a similar contract to run the Commercial Bank of Ghana in West Africa. "By entering into this deal, the bank will not take any financial exposure to the Ethiopian bank. It is purely a fee-based activity for the SBI," said the source.

SBI is set to bag the contract through stiff international competitive bidding. Ernst & Young, the global management consultancy firm, is the advisor to CBE for the deal.

A management team from SBI will soon fly to Ethiopia to manage the bank for the next three to five years. The brief is to upgrade the quality of assets and boost the bank's bottomline. CBE is seeking a sustainable improvement in the operational and financial management of the bank. It also wants SBI to enable it to adapt international best practices for its products and services.

CBE is also seeking that SBI develop a competent Ethiopian management team that can take over at the end of the contract period.

CBE was created in 1963 out of the split of the State Bank of Ethiopia into separate central and commercial banking operations. CBE had remained the sole commercial bank in Ethiopia for about 14 years until the financial markets were opened up to private domestic participation in 1994. CBE apart, there are two state-owned and six private commercial banks in Ethiopia.