Performance of banking industry in Bangladesh: Insights of CAMEL rating

2017 ◽  
Vol 04 (02n03) ◽  
pp. 1750006 ◽  
Author(s):  
Syed Moudud-Ul-Huq
Keyword(s):  
Financial Performance ◽  
Commercial Banks ◽  
Banking Sector ◽  
Banking Industry ◽  
Rating System ◽  
Managerial Ability ◽  
Strategic Plans ◽  
Composite Rating ◽  
Asset Quality

This study attempts primarily to measure the financial performance of banking industry of Bangladesh for the periods 2013–2014 and to rate them according to the composite rating system. For this purpose, 10 private commercial banks (PCBs) have been selected from 38 PCBs. CAMEL has critically analyzed the financial performance of these banks. This finds that most of the banks get 2.14 with an average rating of composite range, where only Eastern Bank Ltd. gets “Strong” rating, seven PCBs get “Satisfactory” rating, AB Bank Ltd. and City Bank Ltd. lay middle of the range of composite score. From this ground, it is clearly reflected that most of the PCBs in Bangladesh have performed quite satisfactorily in recent years. The performance of most banks is dependent more on the managerial ability in formulating strategic plans and the efficient implementation of its strategies. Maintenance of asset quality is the major challenge in this year and is feared to remain so in 2014. The banking sector in Bangladesh has passed somewhat an average year regarding governance, profitability and soundness in 2013. Finally, it is recommended that the banks should be more careful to ensure the quality of assets and its uses, and increased their efficiency in managerial grids.

A comparative performance evaluation of banking industry in Bangladesh: CAMEL rating approach

2021 ◽  
Vol 08 (01) ◽  
pp. 2050052
Author(s):  
Md. Rostam Ali ◽  
Md. Rakibuzzaman Ratul ◽  
Rushafa Tasnim Tisha ◽  
Md. Ashikul Islam
Keyword(s):  
Commercial Banks ◽  
The Other ◽  
Comparative Performance ◽  
Other Hand ◽  
Rank 2 ◽  
Composite Rating ◽  
Earning Quality ◽  
Asset Quality ◽  
Rating Model

This study is an attempt to evaluate and compare the performance of State-Owned Commercial Banks (SOCBs) and Private Commercial Banks (PCBs) of Bangladesh. CAMEL rating model has been applied to confess where a bank can be successful and where it has weaknesses. Data have been collected from four SOCBs and eight PCBs for the years 2014–2017. Among the selected SOCBs, it is found that Agrani Bank holds “Satisfactory” position where Sonali Bank holds “Fair” position through the year 2014–2017. On the other hand, Janata bank has improved its position from “Fair” to “Satisfactory” for the year 2016 and 2017. Moreover, Rupali Bank holds ‘Satisfactory’ position only for the year 2017 where this position was “Fair” for the year 2014–2016. On the other hand, it is found that all the selected PCBs hold “Satisfactory” position through the year 2014–2017. Though the composite rating for both types of banks (SOCBs and PCBs) is in “Satisfactory level”, Rank-1 is given to PCBs and Rank-2 is given to SOCBs. CAMEL ratio for “Asset quality” for both types of banks (SOCBs and PCBs) are showing “Dissatisfactory level”. “Earning quality” of SOCBs is showing at a “Marginal level”. Therefore, proper attention should be given to manage the “Asset quality” and SOCBs should increase the “Earning quality”.

scholarly journals DETERMINANTS OF COMMERCIAL BANKS PROFITABILITY THROUGH ANALYSIS OF FINANCIAL PERFORMANCE INDICATORS: EVIDENCE FROM KOSOVO

2017 ◽  
Vol 18 (0) ◽  
pp. 160-170 ◽  
Author(s):  
Artor Nuhiu ◽  
Arbër Hoti ◽  
Mejdi Bektashi
Keyword(s):  
Financial Performance ◽  
Performance Indicators ◽  
Commercial Banks ◽  
Banking Sector ◽  
Financial Time Series ◽  
Capital Adequacy ◽  
Macroeconomic Factors ◽  
Determinant Factors ◽  
Net Interest Margin ◽  
Asset Quality

The purpose of this study is to elaborate whether the determinants of commercial banks’ profitability affect the financial performance of commercial banks in Kosovo. Performance evaluation of commercial banks in Kosovo is done through measurement of financial performance indicators such as Return on Average Equity (ROAE), Return on Average Assets (ROAA) and Net Interest Margin (NIM). The study identifies the main factors that affect the profitability of commercial banks through analysis of financial time series and panel data of the banking sector in Kosovo. The study presents three models of financial performance analysis which highlight the influencing factors. The models are based on regression analysis, and the obtained results emphasize the relationship between the determinant factors of commercial banks profitability expressed through analysis of financial performance indicators. The study concludes that commercial banks profitability in Kosovo is driven mainly by internal determinant factors such as capital adequacy, asset quality and management efficiency, while macroeconomic factors have insignificant impact on financial performance of commercial banks.

scholarly journals Determinants of Credit Infections: Evidence from Banking Sector in an Emerging Economy

2018 ◽  
Vol 6 (2) ◽  
pp. 47-62
Author(s):  
Ayesha Afzal ◽  
Nawazish Mirza ◽  
Azka Mir
Keyword(s):  
Commercial Banks ◽  
Banking Sector ◽  
Dynamic Panel ◽  
Macroeconomic Variables ◽  
Lending Institution ◽  
Lending Rates ◽  
Asset Quality ◽  
Panel Estimates ◽  
The Empirical Analysis

This paper applies dynamic panel estimates on 22 commercial banks in Pakistan to determine the factors that affect their asset quality. Consequently, the study tests for a comprehensive array of both bank-specific and macroeconomic variables collected quarterly from 2008 to 2016. The empirical analysis confirms that bad asset quality can be explained by retarded GDP growth and unfavorable movement in exchange and lending rates. Within the bank-specific variables, non-performing loans are the most responsive to loans to the agriculture and energy sectors, level of capitalization, size of the lending institution and quality of management.

scholarly journals Evaluation of the Financial Performance between Traditional Private Commercial Banks and Islamic Banks in Bangladesh

2020 ◽  
Vol 4 (2) ◽  
pp. 1-10
Author(s):  
S. M. Akber ◽  
Asha Dey
Keyword(s):  
Financial Performance ◽  
Commercial Banks ◽  
Standard Test ◽  
Capital Adequacy ◽  
Islamic Banks ◽  
Test Format ◽  
Average Ratio ◽  
Significant Difference ◽  
Asset Quality

The paper analyzes and evaluated the performance of Islamic banks and Traditional private commercial banks in Bangladesh with a duration from 2015 to 2019. The basis of the analysis used in this paper is CAMEL test.  All the relevant data has collected from the bank’s websites. To measure and compare the performance this paper has used a sample of five Islamic banks and five Traditional private commercial banks. It considered the average ratio of each year.  A standard test format (CAMEL tests) has used to analyze the performance of Islamic and Traditional private commercial banks. To justify the reliability of the data this paper has used t-tests. The outcome of this paper says that apart from the quality of the management significant difference doesn’t exist between the performance of Islamic Banks and Traditional private commercial banks in Bangladesh based on CAMEL test. Considering the quality of the management and asset quality Traditional private commercial banks perform better, but for the capital adequacy and liquidity position Islamic banks perform better in Bangladesh.

scholarly journals Market structure and performance of Malaysian banking industry

2016 ◽  
Vol 14 (2) ◽  
pp. 158-177 ◽  
Author(s):  
Rossazana Ab-Rahim ◽  
Sheen Nie Chiang
Keyword(s):  
Financial Performance ◽  
Market Structure ◽  
Commercial Banks ◽  
Banking Sector ◽  
Banking Industry ◽  
Least Squares Method ◽  
Efficient Frontier ◽  
Market Concentration ◽  
Content Type ◽  
Net Interest Margin

Purpose The main purpose of this paper is to examine the relationship between the market structure and financial performance of Malaysian commercial banks over the period of 2000 to 2011 by testing the structure-conduct-performance (SCP) and efficient-structure (ESH) hypotheses. Design/methodology/approach Data envelopment analysis (DEA) is employed to measure the efficiency of banks, while concentration ratio is used to assess the market structure of Malaysian banks. Next, utilizing the least squares method, both variables – market structure and efficiency of banks – among other explanatory variables (market share, operating expenses, loans ratio and size of banks) are regressed upon the dependent variable, namely financial performance of banks represented by return on asset (ROA), return on equity (ROE) and net interest margin (NIMTA). Findings The concentration of Malaysian banking industry is at a declining trend; structurally speaking, Malaysian banks are more competitive due to less market concentration. In terms of efficiency, the DEA results reveal that Malaysian banks are operating below their capacity at 40 per cent of efficiency. Thus, Malaysian banks could reduce their utilization of inputs by 60 per cent to operate on the efficient frontier. Next, the results offer support to ESH, which implies that market concentration and banking efficiency determines the profitability performance of Malaysian commercial banks. Originality/value Past studies on Malaysian banking sector had tended to focus either on measuring the performance or assessing the market structure of banks. Thus, this study attempts to fill the gap in the literature by testing the nexus between the market structure and the performance of banks.

Shariah Banking and Financial Performance of Selected Commercial Banks in Kenya

2019 ◽  
Vol 3 (VI) ◽  
pp. 50-66
Author(s):  
Faith Kwamboka Ongera ◽  
Fredrick Ndede
Keyword(s):  
Central Bank ◽  
Financial Performance ◽  
Commercial Banks ◽  
Banking Sector ◽  
Secondary Data ◽  
Business Environment ◽  
Performance Comparison ◽  
Research Approach ◽  
Efficiency Ratio ◽  
Asset Quality

Financial performance is important among banking institutions. The ability to reinvest earnings and aggressively compete for the market share in the business environment is determined by the level of profits. In recent past, Kenyan commercial banks financial performance has declined due to a number of factors ranging from decline in PAT, interest capping, increased competition and rise in non-performing loans. This has created a need for income diversification where commercial banks are diversifying into shariah banking so as to attract investors with an interest in shariah compliant products and services. The main research objective was to investigate shariah compliant banking effects on the selected Kenyan commercial banks in terms of financial performance. The independent variables employed in the study were liquidity, efficiency and asset quality as determinants of financial performance of commercial bank. There are major gaps in the financial performance literature regarding shariah compliant banking. Minimal research studies have been carried on financial performance comparison between commercial and shariah compliant banks in Kenya. In order to achieve the research objectives, descriptive research approach was employed in the study. A census study was carried out; secondary data from relevant central bank data will be used. The population was the four commercial banks operating shariah banking in Kenya. Secondary data from 2013 to 2017 was obtained from the central bank website and the audited financial statements of the selected licensed commercial banks operating shariah banking in Kenya. Data analysis was achieved through use of descriptive, correlation and regression methods. Data was processed through Statistical Package for Social Science software (SPSS). Data was analyzed using descriptive and inferential analysis and presented using charts and tables. Ratio analysis and trend analysis was used in the study.  The study aimed at using the framework of innovation diffusion theory to suggest a model for adoption of shariah banking in the Kenyan banking industry, modern portfolio theory to explain the importance of diversified portfolio in the Banking Sector and Agency Theory. The study found commercial banks’ performance was as a result of that Shariah banking ratio then by liquidity ratio, efficiency ratio, asset ratio, and finally bank size. Bank size had a ratio of 0.0128, expense management ratio 0.0131, efficiency ratio 0.0024, Asset quality 0.0006, liquidity ratio 0.0120 and sharia banking ratio was 0.0025. It was revealed by the research that commercial banks’ adoption of shariah banking positively influenced their financial performance. This research recommends that same studies to be carried out in Africa’s Eastern part to compare since shariah banking’ concentration is on the Asian and West Africa countries. The research recommends that commercial banks management take advantage of its existing branch networks to open shariah banking alongside its core business in tapping the potential new clientele.

scholarly journals Innovation approaches to estimate financial performance of banking sector: the case for Saudi Arabia

2021 ◽  
Vol 5 (2) ◽  
pp. 252-260
Author(s):  
Sanjeev Dhawan ◽  
Afroze Nazneen
Keyword(s):  
Performance Evaluation ◽  
Financial Performance ◽  
Banking Sector ◽  
Financial Structure ◽  
Capital Adequacy ◽  
Bank Performance ◽  
Management Efficiency ◽  
Earning Quality ◽  
Asset Quality

A robust financial structure is considered essential for the swift development and growth and of an economic system. The banking structure is a vital constituent of the financial structure of a nation. The banking system performance assessment is an influential determinant and indicator of the economy's financial strength. Financial Innovation approaches resulting from new technology helps in better estimation of Financial Performances of the banking sector. Banks need to be more closely and accurately watched as they play the role of facilitator of monetary policy of the economy. The prime objective is to examine the financial performance of Saudi Arabia's banking sector through Innovative approaches. With this view, a case study of XYZ Bank has been undertaken. For financial performance evaluation, the CAMEL model has been applied as one of the innovative approaches. This tool is a widely accepted criterion in the field of financial performance evaluation of the banking sector. CAMEL is a ratio-supported mechanism that evaluates bank performance through capital adequacy, quality of assets, management efficiency, quality of earnings, and liquidity. For analyzing the CAMEL model, the various ratios of the model in terms of proxy ratios are given below: For the analysis, nine-year data from 2009 to 2018 has been analyzed using a multiple linear regression model using the SPSS package. The study observed that this innovative approach, i.e., CAMEL specific factors, has mixed influence on the financial performance of XYZ Bank. Capital adequacy and asset quality have a positive effect on bank performance. Moreover, the study also highlights that management efficiency insignificantly affects the profitability of the bank. Moreover, earning quality also signifies a negative influence on profitability. The correlation between asset quality and ROA is negative. It is inferred that those banks with more operating profits and better liquidity management could report high profits. The study further advocates that XYZ Bank must improve its earning quality and management efficiency to come at the same level with the banks having good financial performance and should use innovative methods to estimate financial performance from time to time.

STUDY OF CAMEL RATING SYSTEM IN BANKING SUPERVISION- A CASE STUDY OF NEPAL BANGLADESH BANK LTD

2018 ◽  
Vol 1 (3) ◽  
pp. 74-96
Author(s):  
Dr. S.U. Gawde ◽  
Prof.. Alekha Chandra Panda ◽  
Prof. Devyani Ingale
Keyword(s):  
Banking Sector ◽  
Capital Adequacy ◽  
Rating System ◽  
Financial Risks ◽  
Economic Activities ◽  
Effective Measure ◽  
Critical Elements ◽  
Financial Soundness ◽  
The Usa ◽  
Asset Quality

The banking sector  plays in important role in the country’s economy, acting as an intermediary to all industries. As the banking sector has a major impact on the economy as a whole. Performance evaluation of the banking sector is an effective measure and indicator to check the soundness of economic activities of an economy. Many methods are employed to analyse banking performance. One of the popular methods is the CAMELS framework, developed in the early 1970’s by federal regulators in the USA. The CAMELS rating system is based upon an evaluation of six critical elements of a financial institution’s operations: Capital adequacy, Asset quality, Management soundness, Earnings and profitability, Liquidity, and Sensitivity to market risk. Under this bank is required to enhance capital adequacy, strengthen asset quality, improve management, increase earnings, maintain liquidity, and reduce sensitivity to various financial risks. In the present study an attempt was made to evaluate the performance & financial soundness of NEPAL BANGLADESH BANK LTD using CAMEL approach. Quantitative parameters are computed and updated on a quarterly basis while in respect of the qualitative parameters the ratings / marks given at the time of previous on-site examination

Measurement of Vulnerability of Financial Portfolio of Sharia Commercial Banks by Cardona Method

2017 ◽  
Vol 9 (2) ◽  
pp. 109
Author(s):  
Paulina Harun ◽  
Atman Poerwokoesoemo
Keyword(s):  
Commercial Banks ◽  
Quantitative Research ◽  
Banking Sector ◽  
Banking Industry ◽  
Policy Makers ◽  
Factors Affecting ◽  
Section Data ◽  
Initial Stage ◽  
The Face ◽  
Asset Portfolio

his study aims to: (1) to know and analyze the extent of volatility (vulnerability) of sharia banking industry in Indonesia in the face of competition (2) to know and analyze factors affecting vulnerability of sharia commercial banks; (3) to know and analyze the extent of sustainable development of sharia banking industry to Indonesia's economic development.The research conducted to measure the vulnerability (volatility) of proto folio of syariah bank using observation period 2015, and the data used is cross section data. The research design used in this research is quantitative research, using asset dimension (asset portfolio, liability portfolio, equity portfolio) and stressor (pressure, including: credit risk, market risk, and liquidity risk).The activity plan of this research is: in the initial stage of conducting theoretical study related to the vulnerability related to banking especially BUS; The next step is to determine the asset and stressor dimensions associated with the BUS; Further determine the indicators related to assets and stressors; The next step performs calculations to determine the index of each BUS as well as the dimensions that affect the vulnerabilities faced by each BUS.Target expected outcomes can be generated from this research is: for the object of research (BUS) provide a solution for BUS to deal with and overcome the vulnerabilities encountered and policies that must be done. For policy makers, the results of this study are expected to provide input in decision-making and other policies.Measurement of vulnerability to be performed related to banking operations in the face of competition and the continuity of BUS in Indonesia. The outcomes of this study are expected to be included in Bank Indonesia journals, the selection of this journal is based on studies conducted in the banking sector, especially BUS in Indonesia.

scholarly journals Financial Performance and Income Diversity: Does Ownership Matter? Evidence from Vietnamese Commercial Banks

2020 ◽  
Vol 12 (8) ◽  
pp. 77
Author(s):  
Tin H. Ho
Keyword(s):  
Financial Performance ◽  
Commercial Banks ◽  
Banking Sector ◽  
Stock Exchange ◽  
Real Estate Market ◽  
State Ownership ◽  
Annual Data ◽  
Operating Income ◽  
Panel Regressions ◽  
Credit Shocks

In the context of the sharp development of the Vietnamese stock market in recent years, financial performance of listed firms is drawing the attention of investors, particularly in banking industry. Moreover, the harmony of income diversity or reducing the relying on traditional activities of commercial banks is thriving in the world and strongly influence on Vietnam’s banking, especially when the outbreak of COVID-19 worldwide may result in the freeze of real estate market, which leads to devaluate collaterals as well as the risk of non-performing loans, so-called “credit shocks”. This paper, therefore, examines the impacts of income diversity on financial performance of Vietnamese commercial banks in the period from 2007 to 2019. To conduct this study, annual data are collected of 26 commercial banks, listed in Ho Chi Minh Stock Exchange (HOSE), Ha Noi Stock Exchange (HNX), UPCoM and OTC. The research develops an exploratory model reflecting financial performance of the banks in relation to their income diversity and analyzes data using panel regressions. The results show that there is no relationship between financial performance and income diversity due to its low proportion in total operating income. However, the state ownership makes stronger this relationship despite the small impacts. The findings are expected to add the gap in the existing literature, lacking of investigating the impacts of market power on bank income diversity, and the moderating role of state ownership in this relation in Vietnamese banking sector, which is ignored or opposite in most recent studies. Thereby, the paper also gives some useful implications for investors, bank managers as well as policy makers to catch up the market fluctuations.

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