ASSESSING THE FINANCIAL PERFORMANCE OF CONVENTIONAL BANKS: A COMPARATIVE ANALYSIS PRE AND POST COVID-19 USING THE CAMEL APPROACH

Abstract

Purpose. This study uses the CAMEL method to observe the financial performance of Pakistani commercial banks before and after the COVID-19 pandemic, directing capital adequacy, asset quality, management efficiency, earning quality, and liquidity positions. Methodology: Secondary data from financial statements of 15 commercial banks in Pakistan (2013-2023) were analyzed using descriptive and numerous regression analyses, along with diagnostic tests to confirm validity. Findings: The fixed effect model illustrates that higher capital adequacy and net interest margin are associated with increased ROA, while higher non-performing loans and net interest expenses are associated with decreased ROA. A dummy variable for COVID-19 indicates the pandemic negatively impacted ROA, highlighting its adverse effects on bank performance. Value/Originality: This study applies the CAMEL approach to assess the financial performance of Pakistani banks pre- and post-COVID-19, contributing valuable insights for crisis management and bank performance evaluation for regulators and policymakers. Result: Results show improved capital adequacy and earning quality, likely due to regulatory support and digital banking. However, asset quality, managerial efficiency, and liquidity worsened, leading to lower profitability. Strategic measures are needed to enhance resilience and stability in the sector.