Financial Diagnosis Using CAMEL Model: Public versus Private Banks in Bangladesh

Abstract

The purpose of this paper is to empirically analyze the financial statement of two selected banks (One bank from the public sector and another one from the private) in Bangladesh during 2010-14. This study highlights ranking of two banks for their performance on CAMEL (Capital Adequacy; Asset Quality; Management Quality; Earnings Ability; and Liquidity) ratios. During the year Empirical results suggest that 2010-2014 NCCBL has scored better position of all the ratios except EPS, liquid assets to total assets and liquid assets to total deposits compared to JBL. By considering all of the parameters of CAMEL, NCCBL is the highest position assessed by the CAMEL Model because of its performance on the CAMEL ratios compared to JBL. JBL is lower position compared to NCCBL under the study because of its poor performance on the CAMEL ratios. The ultimate findings of the study indicate that JBL should improve the weaknesses of the CAMEL which ultimately improve the bank’s overall performance. The findings of the paper will enable the practitioners and analysts to understand financial statement analysis in a depth manner.

Do the diversification of income and assets spur bank profitability in Bangladesh? A dynamic panel data analysis

“…Thus, by taking into account the lack of analysis on the Asian economy, this study considered Bangladesh as a key laboratory to explore the effect of income diversification and asset diversification on bank profitability. The latest literature indicates that several scholars have sought to study the determinants of bank profitability in Bangladesh (Rahman et al, 2015;Sufian and Habibullah, 2009;Robin et al, 2018;Sufian and Kamarudin, 2012;Hossain and Ahamed, 2015;Noman et al, 2015;Majumder and Rahman, 2017;Majumder and Li, 2018;Akter, 2017). However, to the best of our understanding, this is a specific study that considers bank diversification as an independent variable and a significant profitability determinant for Bangladesh's banking sector.…”

Camel Model Analysis and Discriminant Analysis of Commercial Banks’ Performance in Guyana, South America

“…Additionally, these institutions are required to maintain a minimum capital adequacy ratio (CAR) of at least eight (8) percent, computed by dividing the total eligible capital of these institutions by their total risk-weighted assets (RWA). This study utilizes the CAR to assess the performance of the banks since it is used extensively in the literature (Al-Najjar & Assous, 2021;Ab-Rahim et al, 2018;Altan et al, 2014;Atker, 2017;Kumar et al, 2022;Mishra & Aspal, 2012;Rauf, 2016;Roman & Sargu, 2013;Venkatesh & Suresh, 2014). According to Lad and Ghorpade (2022), banks with high capital adequacy ratios can satisfy their obligations, while those with low ratios are likely to face bankruptcy.…”

“…This study evaluates the asset quality of commercial banks using the ratio of non-performing loans to total loans. Several studies have utilised this ratio (Altan et al, 2014;Atker, 2017;Roman & Sargu, 2013;Venkatesh & Suresh, 2014) and found it had a significant relationship with bank performance (Derviz & Podpiera, 2008;Muhmad & Hashim, 2015;Ngoboka & Gatauwa, 2020;Nair et al, 2018).…”

“…Earnings quality is an important factor to examine when assessing the performance of banks based on the CAMEL framework since earnings determine the internal capital formation and asset growth of banking institutions as well as their stability (Adem, 2022). There are numerous ratios for assessing the earnings quality of banks, but two of the most frequently used measures are Return on Assets (ROA) and Return on Equity (REO) (Al-Najjar & Assous, 2021; Altan et al, 2014;Atker, 2017;Dincer et al, 2011;Mishra & Aspal, 2012;Roman & Sargu, 2013;Venkatesh & Suresh, 2014). In this study, the return on assets (ROA) is used and computed by dividing the bank's operating income by its total assets.…”

“…The ratio of liquid assets to total assets is a good measure of the liquidity position of commercial banks and is used in this study. Several studies have employed this ratio (Altan et al, 2014;Atker, 2017;Ab-Rahim et al, 2018;Dincer et al, 2011;Mishra & Aspal, 2012;Rauf, 2016). It is also important to note that liquidity is significantly related to bank performance (Echekoba et al, 2014;Muhmad & Hashim, 2015).…”