o_19heefouak9i9v4do11ac41pi7a.pdf

KONSTANTINOS I. LOIZOS
ty (ROE) (Murinde and Kariisa-Kasa, 1997, and Singh, Arora and Anand, 1991) 6 is
the ratio of net profits over share capital and reserves (net worth).
As Figure 4 indicates, return on equity for ETEBA fluctuates for most of the period
of operation between 0.10 (10%) and 0.20 (20%), although initial values are significantly
lower –between 1% and 8% for the period 1964-71. However, there is a
great difference during the final years of operation, 1998-2001, when return on equity
fluctuates between 0.28 (28%) and 0.43 (43%). The fluctuation is even greater for Investment
Bank, reaching lows of -367% (-3.67) in 1991, -160% (-1.6) in 1996 and -
131% (-1.31) in 1997, and a high of 147% (1.47) in 1992. Excluding these extreme
values, the minimum is obtained in 1990 (-49%) and the maximum in 1972 (15%).
Figure 4: Returns on equity
Source: Author’s calculations
Table 4 indicates that ROE rises for ETEBA both on average and in median values
but falls for the other two banks, reaching negative values for the period 1987-2002.
Note that ETEBA manages to offer a return on its equity holdings as high as 14%
(0.14) on average even in the crisis years 1975-86, while the other two banks see their
rates of return diminish to levels of 2% (0.02) or lower. Once again, the wide variation
from ETEBA’s positive to ETBA and Investment Bank’s negative average rates of return
for 1987-2002 indicates the increasingly risky environment in which the banks operated,
a risk borne predominantly by their shareholders, as this measure indicates 7 .
6 Singh et al. (1991) calculate this ratio as ‘Return on owners’ Investment (ROOI)’.
7 Note that ETBA was a public enterprise until 1973 when it was transformed to a joint
stock company with the government as the sole shareholder. However, from 1999 onwards it
underwent a process of privatization.
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