Coop Bank Rides Liquidity Wave as Deposit Growth Outpaces Competitors

Jan 10 , 2026. By NAHOM AYELE ( FORTUNE STAFF WRITER )

Despite the influx of funds, Coop Bank’s profit growth lagged its balance-sheet expansion. Net profit for the year was 1.56 billion Br, slightly down from 1.61 billion Br the previous year. Profit before tax dropped to 1.98 billion Br, a 21.3pc decline. For shareholders, earnings per share slipped from 15pc to 14pc, unveiling the challenge of converting scale into profitability as expenses grew faster than income.

For the Cooperative Bank of Oromia (Coop Bank), the 2024/25 financial year was defined less by distress than by imbalance. The Bank emerged with one of the strongest liquidity positions in the private banking industry, having mobilised deposits at a pace few peers could match.

However, that success came with a clear trade-off, such as weakened asset utilisation, eroding returns, and growing exposure to cost and credit risks. At issue was no longer whether the Bank can mobilise funds, but whether the fast-growing private banks can translate balance-sheet expansion into sustainable earnings without amplifying vulnerabilities.

Over the past year, Coop Bank mobilised deposits totalling 175.19 billion Br, a surge of 49.5pc from the previous year. The conventional banking segment accounted for 84pc of these deposits, while the Interest-Free Banking (IFB) contributed 16pc. The Bank’s deposit portfolio showed a pronounced trend toward savings deposits, which made up nearly 54pc of the total. Despite this robust performance in deposit mobilisation, Coop Bank struggled to convert deposit growth into higher profits and income.

The Bank reported 20 billion Br in earnings during the fiscal year, a modest five percent increase compared to the same period last year. Gross profit for the year was two billion Birr.

At the end of June 2025, Coop Bank’s total assets had climbed to 197.35 billion Br, up from 139.7 billion Br a year earlier, a 41.3pc increase. Deposits grew even faster, with the reported figure of 174 billion Br, up 50.4pc. Nearly 6.4 million transactions were conducted through digital-first solutions, smart branches, and tablet-based transaction systems. The Bank’s E-Birr platform marked a notable expansion of its digital reach, with services available to 207,000 merchants and 36,400 agents nationwide.

According to Dejene Dadi, general manager of the Union of Oromia Coffee Farmers Cooperatives, one of the newly elected board directors, the year was “challenging” for the Bank. He conceded that the Bank had underperformed and posted low profits.

“Profit and loss are normal in the business world,” Dejene said. “But the management should be commended for preventing larger losses.”

He cited liquidity issues, limited capacity to implement strategy, and a lack of focus from taking on too many initiatives instead of making strategic investments as key problems. Despite a capable staff and organisational structure, these issues contributed to underperformance. According to Dejene, the Board and management are taking measures to restore profitability, disclosing that in the past three months, the Bank’s performance has matched gross profits from the previous year, a positive sign that better results are expected in the current fiscal year.

Loans and advances, combining conventional lending and interest-free financing, expanded by 18.5pc to 117.13 billion Br.

Coop Bank disbursed 24.85 billion Br in new loans, below its disbursement target, achieving 85.6pc of the annual goal. A look at sectoral allocation showed that 73pc of Coop Bank’s funds were lent to domestic and international trade, as well as manufacturing, with the balance allocated to agriculture and construction.

However, analysts have raised concerns about this concentration, citing the country’s foreign exchange shortages, inflation, and trade disruptions. The Bank’s digital lending platform, Michu, disbursed 21.76 billion Br in loans to 1.5 million accounts. Loans on this platform are issued without collateral, raising concerns about potential non-performing loans (NPL).

The gap between funding growth and credit expansion stood out as the defining feature of the year. Under Deribie Asfaw’s management, Coop Bank reduced liquidity risk but diluted asset productivity, with rising costs and pressures on credit quality eroding earnings.

Deribie has led Coop Bank’s transformation from a small financial institution to one of the large players in the banking industry. Since taking the helm in 2015, he has steered Coop Bank through rapid growth, digital adoption, and expanded financial inclusion aligned with the Bank's Vision 2030. He was a Vice President of customer accounts and transaction services at the state-owned Commercial Bank of Ethiopia (CBE) before joining Coop Bank, and a district manager at CBE Jimma District in the late 2010s. He studied international business at the University of Greenwich and economics at the Addis Abeba University.

Net profit for the year was 1.565 billion Br, marginally lower than the 1.615 billion Br recorded in 2023/24, a decline of 3.1pc. Profit before tax fell more sharply, dropping to 1.98 billion Br, a contraction of 21.3pc, compared to Lion Bank's reported pre-tax profit of about 1.8 billion Br on assets of roughly 54 billion Br. Abay Bank posted a pre-tax profit of around 4.2 billion Br on assets of 91.3 billion Br, while Nib Bank saw a net loss of about 2.98 billion Br.

Zemen and Berhan banks reported stronger results, with net profits of 5.87 billion Br and 2.1 billion Br, respectively.

These headline figures sat awkwardly alongside the scale of Coop Bank’s balance sheet growth.

Return on assets (ROA) was about 0.93pc, down from the previous year and below expectations for a bank expanding at this rate. Return on equity (ROE), based on average equity, was roughly 9.37pc, reflecting total assets of 197.35 billion Br against equity of 17.46 billion Br and an equity multiplier of about 11.3 times at year-end. This pattern of high leverage driving ROE rather than underlying profitability is typical in deposit-funded banking, leaving Coop Bank sensitive to capital shocks.

The previous year’s figures showed a higher ROA of 1.16pc, a lower equity multiplier of 8.76 times, and a ROE of about 10.13pc.

In 2024/25, the Bank generated a profit of 1.56 billion Br from 17.46 billion Br of shareholders’ equity, roughly nine Birr for every 100 Br invested, slightly lower than in previous years. For every 100 Br of assets, the Bank earned 0.79 Br in profit in 2024/25, down from 1.16 Br the previous year. This signalled declining efficiency in converting assets into profit as total assets grew more quickly than profits.

Leverage grew in step with asset expansion, while profitability narrowed. Derbie was not available for comment.

However, total operating income climbed to 13.99 billion Br from 11.8 billion Br, in line with the larger balance sheet and higher volumes. Net interest income remained the primary revenue source, at 10.24 billion Br, accounting for 73.2pc of operating income, unchanged from the previous year. Net fees and commission income contributed 2.03 billion Br, about 14.5pc, and other operating income added 1.72 billion Br, 12.3pc. The Bank remained primarily interest-spread driven, with fee income providing some cushion, but not enough to fully hedge margins if credit costs rise.

Interest income, at 15.60 billion Br, made up 78pc of total earnings. Islamic financing and banking (IFB) contributed 1.01 billion Br, about 8.12pc of income. Commissions and service charges, a bright spot, brought in 2.69 billion Br, representing 13pc of total earnings.

Cost pressures increased sharply, too. Interest expense grew to 5.36 billion Br, reflecting the rapid expansion of deposits and the cost of funding. Impairment charges for the year were 706 million Br, a modest figure in relation to the loan book, but one that should be weighed against total non-performing exposures. Operating expenses, including personnel costs, depreciation, amortisation, other administrative expenses, and foreign exchange losses, reached 11.31 billion Br.

Taken together, interest expense accounted for about 30.9pc of total costs, personnel costs about 32pc, other operating expenses 25.5pc, and impairment about 4.1pc.

Foreign exchange operations were a notable drag. The Bank reported a net foreign exchange loss of 531 million Br in 2024/25, compared to a positive 215.78 million Br in the previous year. Throughout the year, Coop Bank generated 415 million dollars in foreign currency, with 95pc coming from exports and private transfer remittances. Cash purchases, once a more important source, contributed less than five percent and continue to decline, revealing a concentration risk in foreign exchange sources, given the volatile export sector.

Operating expenses grew rapidly, compressing the bottom line even as income rose. Personnel and administrative costs together accounted for more than half the cost base, which was high by industry standards for branch-led distribution. Overall expenses reached 18 billion Br, up 9.13pc for the year. The increase was a central factor in the weaker performance and the decline in net profit.

Interest expenses dropped slightly to 29.7pc of the total. Salaries and employee benefits increased by 14.3pc. Operating expenses jumped by 14pc to 7.1 billion Br. Notably, operating expenses for daily operations increased by 29.8, notebly faster than the 18.4pc growth in operating income.

According to Aminu Nuru, a financial analyst based in Doha, Qatar, who keenly follows the domestic financial sector, Coop Bank’s management needs to improve cost control and operational efficiency to ensure that expenses do not grow faster than income.

Staff at the Bank voiced concern over rising expenses.

According to Feyisa Ijara, service and marketing manager at the Kersa Main Branch, overall performance was encouraging, but rising expenses had weighed on profitability. Feyisa noted that his branch, which serves many private corporate customers, performed well in attracting new clients and mobilising deposits and foreign exchange. He believes that more effective expense management would allow the bank to achieve a satisfactory level of profit in future years.

A close look at the balance sheet showed the scale of Coop Bank’s expansion. Assets grew by more than 40pc, deposits by over 50pc, but loans by less than 20pc. The loan-to-asset ratio dropped to about 57.5pc from 68.7 percent a year earlier, and the loan-to-deposit ratio fell to roughly 65.2pc from 83pc. While the loan-to-deposit ratio signalled headroom for future lending, the accumulation of cash signalled a deliberate move to shore up liquidity.

It stood out as a relative strength, with comfortable buffers and a lower loan-to-deposit ratio, even as maturity mismatches persisted. Liquidity risk, a frequent trigger for stress in banks, appeared manageable, supported by large cash balances and a reduced need for Central Bank funding.

By June 2025, the Bank’s cash and cash equivalents were 41.93 billion Br, up from 17.3 billion Br a year earlier. Coop Bank reported no outstanding borrowing from the Central Bank in 2025, a change from the 2.5 billion Br borrowed in 2024. The deposit maturity profile remained short-dated, with 66.85 billion Br maturing within 30 days, increasing maturity transformation risk. Off-balance-sheet credit-related items totalled 10.11 billion Br, which could translate into funding needs under stress. The Bank noted ongoing oversight by the asset-liability committee and stress testing, but the rollover sensitivity remained a structural issue.

Credit quality remained a central concern. Stage 3 non-performing exposures were 6.68 billion Br on total gross exposure of 118.23 billion Br, resulting in a non-performing loan (NPL) ratio of about 5.6pc, above the five percent regulatory threshold set by the National Bank of Ethiopia (NBE). However, Stage 2 exposures, early warning or special mention loans, dropped sharply to 1.32 billion Br from 5.51 billion Br the previous year, revealing some improvement in risk management.

Expected credit loss allowances for customer loans were 3.44 billion Br. Against Stage 3 exposures, this covered roughly 33pc, with total allowances equating to 2.9pc of gross exposure. These figures placed Coop Bank on a credit watch list, rather than signalling acute distress. According to analysts, breaching the regulatory reference point should raise supervisory attention, but the trend toward lower Stage 2 balances signalled that risk management efforts are beginning to pay off. Nevertheless, Coop Bank’s asset quality lagged the industry’s average NPL ratio of about 3.9pc, a concern given the Bank’s thinner capital cushion.

Capitalisation was adequate, but it was coming under pressure. Equity at year-end was 17.46 billion Br, producing a capital-to-asset ratio of 8.85pc, down from 11.41pc a year earlier. The asset-to-equity ratio expanded to 11.3 times from 8.76 times. Asset growth outpaced capital accumulation, and with rising credit risk, capital became a binding constraint. The Bank stressed the importance of maintaining healthy loans, controlling expenses, and achieving profitability to safeguard its capital position.

Operational productivity metrics painted a mixed picture. For a Bank with 7,505 employees deployed across 753 branches, net profit per employee was about 208,000 Br, while deposits per branch averaged 231 million Br, figures that revealed efficiency challenges, especially when compared with some peers that generate higher profit per employee through less branch-intensive models. The Bank’s physical network continued to grow, with 753 branches, of which 76.6pc are located in regional and rural areas.

Customer acquisition also saw progress, with 1.42 million new deposit accounts opened during the year, raising the total to 14.74 million accounts, a 10.6pc increase. Coop Bank’s scale was mirrored in its ranking among the larger private banks by assets and deposits, although capital adequacy has become increasingly tied to asset-quality stabilisation.

Management and governance continued to show strengths in liquidity management and risk frameworks. Cost control and credit remediation, however, remained the main tests for the year ahead. Earnings stayed positive but weakened, with returns trending below industry averages. The recent macroeconomic reforms and external sector shifts hit Coop Bank’s bottom line, while some competitors, notably Zemen Bank, enjoyed noteworthy profit growth from the same reforms.

Shareholders were left to question whether Coop Bank could convert its larger balance sheet into sustainable earnings without increasing risk. According to analysts, success will depend on stricter cost discipline, stronger credit underwriting and recovery, and a shift toward higher-yielding assets. Coop Bank has achieved scale and liquidity, but now should show that it can translate this scale into durable profitability and resilience amid a difficult economic environment.

In contrast to its peers, Coop Bank posted a decline in earnings per share (EPS), which fell from 15pc to 14pc compared to the previous year.

Abinet Tarekegn, general manager of the Oromia Agricultural Cooperative Federation, representing over three million members, was not pleased with the Bank’s performance.

“I put my money into investments to earn a return,” he said. “The Bank has failed to deliver on this expectation.”

While he commended Coop Bank’s digitalisation efforts, Abinet criticised its inability to manage expenses, which he identified as a major reason undermining expected profitability.

Newly elected Chairwoman of teh Board, Meskerem Debebe, expressed optimism for the future, citing progress on ongoing construction projects.

The 13-story building in Adama City had finished foundation filling and shoring work, with work progressing on the third basement. In Harar City, a six-story building was nearing completion. Both projects are expected to be completed and operational within the current fiscal year.

PUBLISHED ON Jan 10,2026 [ VOL 26 , NO 1341]