Performance assessment of commercial banks based on camel Indicators: case study of pakistan

Abstract

The purpose of this study is to conduct an in-depth investigation to gauge whether CAMEL indicators have an impact on performance of Commercial banks operating in Pakistan. Moreover, this study aims to determine which commercial banks are the best performers and which are the worst by using CAMEL rating criteria. For the purpose of this study, a sample of 10 Commercial banks operating in Pakistan’s Banking Industry for the period 2011-2017 has been selected. Empirical results revealed that bank performance can be influenced by asset quality, earnings quality and liquidity. Capital adequacy and management efficiency has no impact on EPS (proxy for bank performance). Moreover, CAMEL rating analysis suggested that MCB and ABL are the best performers whose overall performance is strong. The study’s focus is on the performance of commercial banks that are working in Pakistan only. The present study faced resource and time constraints as well. The analysis is based on the secondary data (financial ratios) only. The findings outcome is imperative to various parties who have stake in banking sector e.g. depositors, shareholders, SBP, investors etc. It can also be used as a basis to identify the areas where the banks are performing poorly and take suitable actions which would assist in sustaining and growing the banking sector of Pakistan.