Executives and the board of directors at Commercial Bank of Ethiopia (CBE) are negotiating with McKinsey & Company, an American management consulting firm, to design strategies and draw up an action plan. If awarded, McKinsey will also review the quality of loans the Bank advanced, which carries a large aggregate of unserviced private and public sector loans.

McKinsey reached the final stage after offering a little over 1.7 million dollars, a quarter of the value of the second-lowest bidder, PricewaterhouseCoopers East Africa (PwC). McKinsey, which the Bank notified for its lowest bid, has yet to sign the contract as negotiations over the period the company's experts will stay in the country are still ongoing, according to sources close to the case.

McKinsey will undertake a comprehensive assessment of the Bank and diagnose the core sources or causes of CBE's weaknesses. It is also expected to come up with remedies, design strategies, and monitoring and evaluation tools, as well as drawing up a clear plan of action for implementation.

The eight-decade-old and largest publicly-owned bank has been in reform mode over the past year in order to get out of the hot water it has been in. The Bank has been struggling with a liquidity crunch and bad loans due to state-owned enterprises' accumulated debts. CBE is the primary domestic financing source, owning a 53pc share of the 945 billion Br in outstanding domestic debts registered to them since 2017.

Its lending went to the construction of the Grand Ethiopian Renaissance Dam (GERD), condominium housing projects, the 10 sugar factories, Yayu Multi-Complex Industries, and building the railways, among other state-run projects. Most of the loans carried by these enterprises are considered residual debts. After the new President Abei Sano's arrival last year, the board and executives of the Bank have been working on restructuring the bad loan portfolio.

Recently, the government formed a new Corporation that will absorb 570 billion Br of the state-owned enterprises' residual debts, over half of which was taken from Commercial Bank. The state-owned enterprises pledged to service the remaining debt based on negotiations with the Bank.

The Bank stepped into reviewing its loan quality and floated a tender to hire a company for the service. The bid was announced in September. Four global management and audit firms took part in the bidding process, which is overseen by the president of the Bank himself, and board directors including Eyob Tesfaye (PhD) and Mamo Mihretu, unlike other bidding processes. But only three of them, McKinsey & Company, PwC and KPMG, were technically evaluated.

PwC and McKinsey's financial offers, which were able to make the technical evaluation, were opened at the end of January. During the financial opening, McKinsey & Company came in as the lowest bidder, offering a significantly lower offer than that of PwC. Executives from PwC did not respond to an inquiry from Fortuneregarding the company's offer.