This paper examined the effects of the 1994 financial sector reform on the performance of banksrnusing descriptive analyses. It also estimated the determinants of market share in the Ethiopianrnbanking industry by employing the standard fixed effect panel data model. The model allowsrnexplanatory variables to vary over two dimensions (firms and time), which helps to have accuraternestimators in cases where there are only few firm s and the time period is short. As the bankingrnbusiness dominates the Ethiopian financial sector, the paper is focused on studying the bankingrnsector performance whil e gleani ng through rather briefly the financial sector performance as arnwhole. The descriptive part of the study analyzed the pre- and post-reform data of public andrnprivate banks by applying standard financial ratio and comparative trend analyses.rnThe results of the study suggest that the sector has gained progress in terms of profitability, assetrnquality and efficiency after the reform, as expected. However, considering the intermediationrneffect to the larger economy, contribution of the financial sector is not substantial. The majorrnproblems include confining banking service to trade and service financing, weak fiscal stance andrnineffective economic policy of the government and lack of strategic planning and programrndevelopment by the central bank. Resource reallocation of banks towards production andrnmanufacturing sector of the economy does not show significant improvement following thernfinancial sector reform. The government's redundant involvement in the economy is crowdingrnout the private sector, which would have been the efficient sector. The recently tighteningrn. financial regulation and absence of long term financial development program of the central bankrnhas also endangered the prospects for effective intermediation role of banks in Ethiopia.