ArticlePDF Available

Financial performance analysis of selected public sector banks: A CAMEL Model approach

Authors:

Abstract

Banking industry is one of the crucial and important industry of Indian economy. There are many banking companies working in India. Banking Industry is growing at a faster pace and thus the competition too. Due to passage of time there has been a constant change in the performance of banks, which leads to change in ranking and position of the banks every year. It may be very difficult to compare the performance and ranks and this study will helps to find out which bank is better among leading banks and where the investors and customers should invest money into. There are many aspects to measure the performance of banks like WACC, Regression Analysis and CAMEL Model is one important of them and thus it is being used in study to measure and compare the financial performance of leading five public sector banks, on the basis of total assets and consolidated basis, in India for 5 years from 2009-2014. The banks include Bank of Baroda, State Bank of India, Punjab National bank, Bank of India, and Canara Bank. The data is collected from annual reports of these banks and various ratios have been calculated measuring the aspects of CAMEL which includes capital adequacy, asset quality, management efficiency, earning quality and liquidity. After calculating these ratios, it is found that Bank of Baroda is leading in all the aspects of CAMEL followed by Punjab National Bank in Capital Adequacy, Management efficiency and Earning capacity and Bank of India in Asset Quality.
I J A B E R, Vol. 13, No. 6 (2015): 4327-4348
FINANCIAL PERFORMANCE ANALYSIS OF
SELECTED PUBLIC SECTOR BANKS: A CAMEL
MODEL APPROACH
Jaspreet Kaur1, Manpreet Kaur2 and Dr. Simranjit Singh3
Abstract: Banking industry is one of the crucial and important industry of Indian economy.
There are many banking companies working in India. Banking Industry is growing at a
faster pace and thus the competition too. Due to passage of time there has been a constant
change in the performance of banks, which leads to change in ranking and position of
the banks every year. It may be very dicult to compare the performance and ranks and
this study will helps to nd out which bank is beer among leading banks and where the
investors and customers should invest money into. There are many aspects to measure
the performance of banks like WACC, Regression Analysis and CAMEL Model is one
important of them and thus it is being used in study to measure and compare the nancial
performance of leading ve public sector banks, on the basis of total assets and consolidated
basis, in India for 5 years from 2009-2014. The banks include Bank of Baroda, State Bank
of India, Punjab National bank, Bank of India, and Canara Bank. The data is collected
from annual reports of these banks and various ratios have been calculated measuring
the aspects of CAMEL which includes capital adequacy, asset quality, management
eciency, earning quality and liquidity. After calculating these ratios, it is found that
Bank of Baroda is leading in all the aspects of CAMEL followed by Punjab National Bank
in Capital Adequacy, Management eciency and Earning capacity and Bank of India in
Asset Quality.
Key Words: Banking, CAMEL Model, Financial Performance, Ratios.
1. INTRODUCTION
1.1 Banking Sector
Bank is a nancial intermediary that accepts deposits and lend money to the
people and an institution providing the service of transferring money and
generating income. The word ‘Bank’ basically means ‘bench or counter’ and comes
from the middle French word named banque. Due to the signicance of banks in
1. Asst. Prof., School of Business, Lovely Professional University, Punjab.
Email: jaspreetmphillpu@gmail.com
2. Asst. Prof., School of Business, Lovely Professional University, Punjab.
Email: manpreetkaurvirdi@hotmail.com
3. Associate Prof., DIPSIMT, Punjab Email: arorasimranjit@yahoo.com
4328 • Jaspreet Kaur, Manpreet Kaur and Dr. Simranjit Singh
the nancial system and national economies, they are highly regulated in most
countries and now become the part and parcel of everybody’s life.
1.2 DierenttypesofBanksintheworld
There are dierent types of banks being present in the world. Some of the types are:
Commercial Banks, Community Development Banks, Cooperative Bank, Credit
Unions, Ethical Banks, Exchange Bank, Federal or National Banks, Indigenous
Bank, Industrial Development Bank, Internet Banking, Investment Bank, Islamic
Banks, Land Development Bank, Merchant Banks, Mortgage Banks, Postal Savings
Bank, Private Bank, Savings Banks.
1.3 TypesofBanksinIndia
(a) Public Sector Banks
(b) Private Sector Banks
1.4 CAMELRatingSystem
1.4.1 Concept
It was developed in USA to describe the bank’s overall condition. It is applied
to approximate 8000 institutions i.e. covering every bank and credit union in
USA and now being implemented in other parts of the world by various banking
supervisory regulators.
1.4.2 Components of CAMEL Rating System
The banks are rated on the basis of camel where ‘C’ means Capital adequacy, ‘A’ is
for Assets Quality, ‘M’ for Management Eciency, ‘E’ is for Earnings Quality and
‘L’ for Liquidity.
Table4.1
ShowingTheCAMELModelwithItsRatios
Camel Ratios Formulas Elaborated Formula Content:
C Capital Adequacy
Ratio
Tier 1 Capital + Tier 2
Capital/ Risk Weighted
Assets
Tier 1 Capital= (Paid Up Capital +
Statutory Reserves + Disclosed Free
Reserves)-(Equity Investments In
Subsidiary + Intangible Assets + Current
& B/F Losses)
Debt-Equity Ratio Total Debt/Total
Shareholder’s Funds
Tier 2 Capital= A) Undisclosed Reserves
+ B) General Loss Reserves + C) Hybrid
Debt Capital Instruments
Financial Performance Analysis of Selected Public Sector Banks… 4329
Advance to Asset Ratio Total Advances/ Total
Assets
And Risk Can Be either Weighted Assets
Or Minimum Capital Requirement
Government Securities
to Total Investment
Government Securities/
Total Investments
Total Debt= Long-Term + Short-Term
Borrowings
A Net NPA to Total Assets Total Non-Performing
Assets/ Total Assets
Net NPA to Net
Advances
Total Non-Performing
Assets/Total Advances
Total Investments to
Total Assets
Total Investments/Total
Assets
Percentage Change In
NPA
M Total Advances to Total
Deposits
Total Advances/Total
Deposits
Prot Per Employee Revenue – Operating
Expenses/ Full Time
Equivalent
Business Per Employee Revenue/Number of
Employees
Return On Net Worth Net Income/ Shareholder’s
Equity
E Operating Prot to
Average Working
Funds
Operating Prot/ Working
Funds
Working Funds= Average of Total Assets
/ Liabilities
Percentage Growth in
Net Prot
Net Prot to Average
Assets
Net Prot/ Average Assets
L Liquid Assets to
Demand Deposits
Liquid Assets/Demand
Deposits
Liquid Assets = Cash In Hand, Balance
With The RBI, Balance With Other Banks
(Both In India And Abroad), and Money
At Call And Short Notice.
Liquid Assets to
Total Deposits
Liquid Assets/ Total
Deposits
Total Deposits = Demand Deposits,
Savings Deposits, Term Deposits And
Deposits Of Other Financial Institutions.
Liquid Assets to
Total Assets
Liquid Assets/ Total Assets
Government Securities
to Total Assets
Government Securities/
Total Assets
Approved Securities to
Total Assets
Approved Securities/ Total
Assets
Approved Securities = Investments
made in The State-Associated Bodies
Like Electricity Boards, Housing Boards,
Corporation Bonds, Share Of Regional
Rural Banks
Source: Aspal P.K. (2013), A Camel Model Analysis of State Bank Group”, World Journal of Social Sciences, Vol. 3,
No. 4 accessed from www.econjournals.com /index.php/ ije/article /viewl e/814 /pdf on 20-Sept-2014.
2. LITERATURE REVIEW
Sangmi and Nazir (2010) have taken two major banks of north India namely,
Punjab national bank and Jammu and Kashmir Bank on the basis of their role and
participation in inuencing the nancial condition of North India. They applied
the Camel Model on these two banks by taking the annual report data from 2001-
2005, and found out that both the banks were nancially sound and suitable as
far as their capital adequacy, asset quality, management capability and liquidity is
concerned.
Mishra and Kumari (2011) selected 12 public and private sector banks on the basis
of market capture and measured the eciency and soundness by Camel Model.
From the analysis they ranked the banks. They said that HDFC takes the lead
followed by ICICI and Axis Bank. Bank of Baroda and Punjab National Bank
follows the fourth position holded by IDBI and Kotak Mahindra Bank. Public
Sector Banks like SBI and Union Bank takes the back seat. It donates that Private
Sector Banks are performing beer than Public Sector Bank.
Jha and Hui (2012) tried to nd out the factors aecting the performance of
Nepalese Commercial Banks By using various camel ratios such as return on
asset (ROA), return on equity (ROE), capital adequacy ratio (CAR) etc. As Public
sector banks have higher total assets compared to joint venture or domestic private
banks, thus ROA was found higher whereas overall performance of public sector
was unsound because ROE and CAR of joint venture and private banks was found
superior. The nancial performance of public sector banks is being eroded by other
factors such as poor management, high overhead cost, political intervention, low
quality of collateral etc.
Kumar (2012)has given a denition to camel rating system, according to him it is
a mean to categorize bank based on the overall health, nancial status, managerial
and operational performance. In his study he has chosen the SBI and its associates
for checking the performance and concludes that State Bank of India is always in
the lead than its associates in every aspect of camel.
AspalandMalhotra(2013) measured the nancial performance of Indian public
sector banks’ asset by camel model and applying the tests like Anova, f test and
arithmetic test for the data collected for the year 2007-2011. They concluded that
the top two performing banks are bank of Baroda and Andhra bank because of
high capital adequacy and asset quality and the worst performer is united bank of
India because of management ineciency, low capital adequacy and poor assets
and earning quality. Central bank of India is at last position followed by UCO bank
and bank of Maharashtra.
4330 • Jaspreet Kaur, Manpreet Kaur and Dr. Simranjit Singh
Kumar and Sharma (2013)analyzed the performance of top 10 and highest market
capitalized banks in India with the help of camel model approach, for the year
200610, their study found that Kotak Mahindra Bank is on the lead and on highest
position in terms of capital adequacy followed by ICICI bank and they both are
more ecient in managing their liquidity. SBI has highest NPA level among their
peer group followed by ICICI bank whereas PNB is highly management ecient
with the highest grading in this parameter. Earning quality of SBI and PNB are on
top but overall SBI is ranked rst followed by PNB and HDFC.
Lakhtaria (2013) has selected the top 3 public sector banks, i.e. Bank of Baroda,
Punjab National Bank and State Bank of India for his study using camel model
and has ranked the banks according to the performance and data interpreted.
According to him Bank of Baroda stood rst followed by Punjab National Bank
and State Bank of India is on third position as per the data analyzed.
Matkar (2013) has conducted a study on MSC banks by using camel model. From
his study he concluded that there has been an increase in the prots and business
per employee and capital adequacy ratio is also enhanced. Due to the increase in
the net non-interest income and decrease in operating expenses, sta level cost for
the last few years, the banks have displayed a good growth. Retail banking and its
products has also shown a progress in MSC banks.
MisraandAspal(2013) did the study on whole state bank group by using camel
model approach and applying the tests like Anova, kolmogorov-smirnov, and
shapirowilk and found out that though state bank of India is bigger entity than
its other associates It got the lowest rank in every aspect whether the liquidity or
the asset quality while state bank of Bikaner and Jaipur and state bank of Patiala
is at the top position. The reason for geing lowest rank for SBI is that SBI has not
been able to perform well in debt-equity, government securities to total investment
ratios, advances to assets etc.
Chaudhary(2014)conducted a study to measure the right performance of public
and private sector banks by the use of secondary data collected from annual
reports, periodicals, website etc. for the year 2009-2011 and found out that in every
aspect private sector bank has performed beer than public sector banks and they
are growing at faster pace.
HotiandAlshiqi(2014)need to analyze the nancial performance of the banking
system in Kosovo from 2006-2012 using camel model and by calculating return on
investment. They concluded that they did not nd any signicance dierence in
the overall performance of the banks and this thing can only happen in the times
of global nancial crisis which was earlier faced by Kosovo, leing less sensitive
eect. Most banks were found with health balance sheet with a small level of
reserves for loans.
Financial Performance Analysis of Selected Public Sector Banks… 4331
3. RESEARCH METHODOLOGY
3.1 ObjectiveoftheStudy
1. To Evaluate the Financial Performance of Selected Public Sector Banks using
the CAMEL model approach.
2. To Compare the Banks and their Performance of 5 years.
3.2 Research Design
3.2.1 Type of Research
The present study is a descriptive research.
3.2.2 Sources of Data
The secondary data has been used for the study, which is taken from the annual
reports of the banks.
3.2.3 Samples
For conducting this research, Leading 5 Public sector banks have been nominated
based on the total assets namely State Bank of India, Bank of Baroda, Punjab
National bank, Bank of India and Canara Bank as per consolidated basis.
3.2.4 Parameters for Measuring Financial Performance:
CAMEL Model has been used to conduct the Research.
4. ANALYSIS AND INTERPRETATION
4.1 CapitalAdequacy
4.1.1 Capital to Risk-weighted Assets Ratio (CRAR)
Table4.1.1
ShowingCRARofSelectedBanks
SR
No.
Banks BASEL II – CRAR (%)
2014 2013 2012 2011 2010 Average Rank
1 SBI 12.96 12.92 13.86 11.98 13.39 13.02 3
2 BOB 12.87 13.30 14.67 14.52 14.36 13.94 1
3 PNB 12.69 13.16 12.63 12.42 14.16 13.01 4
4 BOI 11.15 11.11 12.03 12.24 13.00 11.91 5
5 CB 11.14 12.40 13.76 15.38 13.43 13.22 2
4332 • Jaspreet Kaur, Manpreet Kaur and Dr. Simranjit Singh
AnalysisandInterpretation
All the four Banks namely Bank of Baroda, Canara Bank, State Bank of India
and Punjab National Bank has approximately equal amount of CRAR with
13.94,13.22,13.02,13.01. It Implies that these banks have greater capacity to adapt
to the loss if occurs though Bank of Baroda has highest ranking in CRAR in Basel
II. On the other hand Bank of India has taken the last positions with CRAR 11.91%,
which is the least. So, Bank of Baroda does not have much capacity to adapt to its
losses. But all the banks have followed the guidelines of RBI and has maintained
the CRAR of 9%.
4.1.2 Debt-Equity Ratio
Table4.1.2
ShowingDebt-EquityRatioofSelectedBanks
SR
No.
Banks Debt-Equity Ratio (%)
2014 2013 2012 2011 2010 Average Rank
1 SBI 13.54 14.16 14.30 16.17 14.44 14.52 2
2 BOB 16.23 15.24 13.77 14.28 15.65 15.03 3
3 PNB 13.51 12.80 13.65 14.55 15.36 13.97 1
4 BOI 17.08 17.05 16.37 18.18 15.12 15.16 5
5 CB 14.69 14.80 14.76 14.97 16.02 15.05 4
AnalysisandInterpretation
Punjab National bank Secures rst Position in Debt-Equity ratio with 13.97 followed
by State Bank of India with 14.52. Canara Bank and Bank of India stands at last
with average of 15.05 and 15.16 times. It means that the Creditors and depositors
of Punjab National Bank and State Bank of India are more secured as they are
using less debt than other 3 banks, Whereas Creditors and Depositors of Bank of
Baroda and Bank of India are at higher risk as they are focusing more on Debt than
the shareholder’s wealth and Bank of India stays last with the highest risk and by
Debt-Equity Ratio of 15.16
Financial Performance Analysis of Selected Public Sector Banks… 4333
4.1.3 Advances to Assets Ratio:
Table4.1.3
ShowingAdvancestoAssetsRatioofSelectedBanks
SR
No.
Banks Advances to Asset Ratio (%)
2014 2013 2012 2011 2010 Average Rank
1 SBI 65.87 65.28 63.59 61.07 59.95 63.15 2
2 BOB 59.71 59.64 63.85 63.37 62.51 61.82 4
3 PNB 63.68 64.49 64.05 64.13 62.95 63.86 1
4 BOI 64.45 63.68 64.43 60.54 61.05 62.83 3
5 CB 60.31 57.81 61.39 62.34 63.58 61.09 5
AnalysisandInterpretation
Punjab National Bank has got the highest position in advances to assets ratio by
63.86% followed by State Bank of India with 63.15%, Whereas Bank of Baroda and
Canara Bank holds the last positions with 61.81% and 61.09%. Though the average
of all the Banks were approximately same, it means that all the banks have a good
lending policy. But Punjab National Bank and State Bank of India has adopted a
beer lending policy than other banks because there ratios are higher, which will
denitely increase the prots of the banks.
4.1.4 Government Securities to Total Investments Ratio
Table4.1.4
ShowingGovernmentSecuritiestoTotalInvestmentsofSelectedBanks
SR
No.
Banks Government Securities to Total Investment (%)
2014 2013 2012 2011 2010 Average Rank
1 SBI 76.36 76.33 78.88 76.29 75.14 77.00 5
2 BOB 83.12 84.98 84.61 85.13 83.4 84.25 1
3 PNB 77.91 82.39 84.61 85.13 83.40 82.69 4
4 BOI 83.40 83.82 84.04 80.21 87.81 83.86 3
5 CB 80.94 80.80 84.34 83.06 90.88 84.00 2
4334 • Jaspreet Kaur, Manpreet Kaur and Dr. Simranjit Singh
AnalysisandInterpretation
The four Banks namely, Bank of Baroda, Canara Bank, Bank of India, Punjab
National Bank has invested equal amount of money in government securities in
proportion of its total investments. It indicates that Investments of Bank of Baroda
Canara Bank, Bank of India, and Punjab National Bank are on safer side though
Bank of Baroda secures rst position with 84.25% of investments in government
securities. On the other hand State Bank of India secures last position with low
percentage of 77.00% which states that investments of State Bank of India in debt
instruments are at higher risk as compared to other four Banks.
4.2AssetsQuality
4.2.1 Net NPAs to Net Advances Ratio
Table4.2.1
ShowingNetofAssetstoNetAdvancesRatioofSelectedBanks
SR
No.
Banks NNet NPA to Net Advances (%)
2014 2013 2012 2011 2010 Average Rank
1 SBI 2.57 2.10 1.82 1.63 1.72 1.97 5
2 BOB 1.52 1.28 0.54 0.35 0.34 0.81 1
3 PNB 2.85 2.35 1.52 0.85 0.53 1.62 4
4 BOI 2.00 2.05 1.47 0.91 1.31 1.55 2
5 CB 2.00 2.17 1.46 1.10 1.06 1.56 3
AnalysisandInterpretation
Bank of Baroda secures rst position with lower NPA of 0.81% against Net
Advances followed by Bank of India and Canara Bank with 1.55 and 1.66%. It
states that Bank of Baroda has adopted a beer lending policy and managing the
Non-performing assets in a beer way than other four banks. Whereas State Bank
of India has higher NPA with 1.97% and securing the last position indicating the
poor management and lending policy.
Financial Performance Analysis of Selected Public Sector Banks… 4335
4.2.2 Total Investments to Total Assets Ratio
Table4.2.2
ShowingTotalInvestmentstoTotalAssetsRatioofSelectedBanks
SR
No.
Banks Total Investments to Total Assets (%)
2014 2013 2012 2011 2010 Average Rank
1 SBI 24.15 24.34 25.19 25.43 27.77 25.37 3
2 BOB 18.06 22.45 18.95 20.24 22.21 20.38 1
3 PNB 25.96 25.12 26.72 25.08 26.10 26.20 4
4 BOI 20.14 21.11 22.71 24.55 24.60 22.62 2
5 CB 27.03 30.41 28.09 25.50 26.68 25.54 5
AnalysisandInterpretation
Bank of Baroda stands at rst position in Investments to assets ratio with 20.38%
followed by Bank of India with 22.62%. It means that both the Banks are focusing
on advancing the money rather investing, for the future growth of the business
and adopting an aggressive policy. Whereas, Punjab national Bank and Canara
Bank is focusing on making a cushion against Nonperforming assets by investing
the money more with the investments to assets ratio of 26.20 and 25.54%. These
both banks are using conservative policy and are more feared of nonperforming
assets.
4.2.3 Net NPAs to Total Assets Ratio
Table4.2.3
ShowingNetNPAtoTotalAssetsRatioofSelectedBanks
SR
No.
Banks Net NPA to Total Assets (%)
2014 2013 2012 2011 2010 Average Rank
1 SBI 1.76 1.34 0.86 0.75 0.75 1.09 5
2 BOB 0.89 0.75 0.33 0.21 0.21 0.48 1
3 PNB 1.72 1.45 0.95 0.53 0.32 0.99 4
4 BOI 1.28 1.30 0.94 0.55 0.80 0.97 3
5 CB 1.2 1.25 0.89 0.69 0.67 0.94 2
4336 • Jaspreet Kaur, Manpreet Kaur and Dr. Simranjit Singh
AnalysisandInterpretation
Bank of Baroda secures rst position with the lowest NPA of 0.48 followed by
Canara Bank with 0.94%, Bank of India, Punjab National Bank and State Bank
of India with 0.97, 0.99 and 1.09%. It states that Bank of Baroda has beer Credit
Policy and are able to recover the loan from the debtors than the other banks. They
are at lower risk of increasing Non-performing assets. Whereas, the NPA of other
four banks is comparatively high, it means that these banks are not making much
eorts to decrease their NPA’s as Bank of Baroda is doing.
4.2.4 Percentage Change in Net NPAs Ratio
Table5.2.4
ShowingPercentageChangeinNetNPARatioofSelectedBanks
SR
No.
Banks Percentage change in NPA (%)
2014 2013 2012 2011 2010 Average Rank
1 SBI 46.63 36.44 28.12 13.59 12.32 25.42 1
2 BOB 43.95 171.57 95.18 31.30 34.14 75.23 3
3 PNB 37.04 62.46 118.5 107.7 272.06 119.55 5
4 BOI 24.71 62.66 87.99 -11.88 251.38 82.97 4
5 CB 13.02 55.86 45.34 30.43 19.40 32.81 2
AnalysisandInterpretation
State Bank of India stands at rst position with average change in NPA of 25.32
followed by Canara Bank with 32.81. It is comparatively lower than Bank of Baroda,
Bank of India and Punjab National Bank with 75.23, 82.97, and 119.5. It means that
State Bank of India and Canara Bank has less uctuations in their NPAs. They are
constantly increasing or decreasing at lower rate. Whereas, other three banks are
showing greater uctuations. Like in Bank of India percentage change in NPA was
251.38% and in 2011 it goes negative with -11.38% and rises again with 87.99%.
Which shows high uctuation and is bad for bank. On the other hand Punjab
National Bank stands at last position with average of 119.5. Though it is at last,
the percentage change in NPA is constantly decreasing which is a good sign for
the bank. In addition, State bank of India stands at rst but their NPA is increasing
constantly.
Financial Performance Analysis of Selected Public Sector Banks… 4337
4.3ManagementEciency
4.3.1 Total Advances to Total Deposits
Table4.3.1
ShowingTotalAdvancestoTotalDepositsRatioofSelectedBanks
SR
No.
Banks Total Advances to Total Deposits (%)
2014 2013 2012 2011 2010 Average Rank
1 SBI 85.82 85.57 82.25 80.16 77.88 82.34 1
2 BOB 69.60 69.12 74.39 74.48 72.25 72.25 4
3 PNB 79.37 80.27 78.39 78.34 62.95 75.86 2
4 BOI 77.85 75.86 78.18 71.34 73.36 75.32 3
5 CB 71.64 68.16 71.19 72.10 72.26 71.07 5
AnalysisandInterpretation
State Bank of India Stands at First Position with Advances to Deposits ratio of 82.34%
followed by Punjab National Bank with 75.86%, Bank of India with 75.32%, and
Bank of Baroda with 72.25% and Canara Bank secures last position with 71.07%. It
states that State Bank of India has made ecient and appropriate utilization of Its
Depositor’s deposits by advancing the money for maximum growth of the bank.
Whereas, other four banks namely, Bank of Baroda, Punjab National Bank, Bank
of India, Canara Bank has approximately equal Ratio of Advances to Deposits
following State Bank of India. It means that they have utilized the money in good
way but not as ecient as State Bank of India.
4.3.2 Return on Net Worth
Table4.3.2
ShowingReturnonNetworthRatioofSelectedBanks
SR
No.
Banks Return on Net worth (%)
2014 2013 2012 2011 2010 Average Rank
1 SBI 9.83 14.65 14.90 13.39 14.46 13.45 4
2 BOB 14.59 13.00 19.11 21.42 22.19 18.06 1
3 PNB 9.69 15.19 15.2 20.22 23.08 17.07 2
4 BOI 8.87 11.20 12.49 14.11 13.35 12.00 5
5 CB 8.58 11.72 14.09 19.00 21.80 15.04 3
4338 • Jaspreet Kaur, Manpreet Kaur and Dr. Simranjit Singh
AnalysisandInterpretation
Bank of Baroda is at the peak with 18.06% of Return on Net worth followed by Punjab
National Bank with 17.07%. It means that Bank of Baroda and Punjab National Bank
are earning good amount of Prots which in result beneing the shareholders.
Higher the Prots, Higher the return on equity or money invested in the banks.
Canara Bank stands at middle position with good rate of return, whereas State Bank
of India and Bank of India has least Rate of Return with 13.45 and 12.00%.
4.3.3. Prot per Employee
Table4.3.3
ShowingProtperEmployeeofSelectedBanks
SR
No.
Banks Prot per employee (Cr.)
2014 2013 2012 2011 2010 Average Rank
1 SBI 0.048 0.064 0.053 0.038 0.044 0.05 5
2 BOB 0.098 0.10 0.12 0.106 0.078 0.10 1
3 PNB 0.054 0.080 0.084 0.083 0.073 0.075 2
4 BOI 0.062 0.064 0.064 0.062 0.044 0.06 4
5 CB 0.05 0.069 0.082 0.097 0.073 0.074 3
AnalysisandInterpretation:
Higher the Prot Per employee, beer is it for the employees and company. In
this Bank of Baroda stands at rst position with prot per employee of 10 lakhs
followed by Punjab National Bank with 5.5 lakhs and Canara Bank with 5.4 Lakhs.
It states that employees of Bank of Baroda are earning good amount of prots than
other four banks. Whereas, employees of Bank of India and State Bank of India are
earning least amount of prots with 6 lakhs and 5 lakhs.
4.3.4 Business per employee
Table5.3.4
ShowingBusinessperEmployeeofSelectedBanks
SR
No.
Banks Business per employee (Cr.)
2014 2013 2012 2011 2010 Average Rank
1 SBI 10.64 9.44 7.98 7.04 6.36 8.29 5
2 BOB 18.65 16.89 14.66 12.29 9.81 14.46 1
Financial Performance Analysis of Selected Public Sector Banks… 4339
3 PNB 12.83 11.65 11.32 10.18 8.08 10.81 4
4 BOI 19.63 15.82 13.60 12.84 10.11 14.40 2
5 CB 14.42 14.20 13.74 11.96 9.83 12.83 3
AnalysisandInterpretation
Higher the business per employee, higher is the productivity of the human
resources. The above table shows that Bank of Baroda and Bank of India stands
at leading positions in case of business per employee i.e. having a good amount
of business per an individual worker with 14.46 and 14.40 crores. It means that
Human Resources of these both banks is more ecient. Whereas, State Bank of
Indian stands at last with a low business per employee of 8.29 Crore, which is
lower than other four banks. The eciency and productivity of Employees of State
Bank of India is quite low.
4.4 EarningQuality
4.4.1 Operating Prot to Total Assets
Table4.4.1
ShowingOperatingProttoTotalAssetsofSelectedBanks
SR
No.
Banks Operating Prot to Total assets (%)
2014 2013 2012 2011 2010 Average Rank
1 SBI 1.34 1.46 2.38 2.17 1.75 1.82 3
2 BOB 1.61 1.88 2.19 2.22 2.03 1.99 2
3 PNB 1.98 2.19 2.59 2.72 2.70 2.44 1
4 BOI 1.46 1.63 1.81 1.78 1.88 1.71 4
5 CB 1.51 1.56 1.72 2.15 1.50 1.69 5
AnalysisandInterpretation
Higher the operating prot, beer are the operations. Punjab National Bank has
properly utilized the Money invested in the assets and thus leads in operating
prot to assets ratio with 2.44%. Followed by Bank of Baroda with 1.99%. Whereas,
Bank of India and Canara Bank could not utilize the rupee in an ecient way as
stands at last with Ratio of 1.71 and 1.69%.
4340 • Jaspreet Kaur, Manpreet Kaur and Dr. Simranjit Singh
4.4.2 Net Prot to Total Asset
Table4.4.2
ShowingNetProttoTotalAssetsofSelectedBanks
SR
No.
Banks Net Prot to Total Assets (Times)
2014 2013 2012 2011 2010 Average Rank
1 SBI 0.64 0.93 0.91 0.72 0.87 0.81 4
2 BOB 0.74 0.86 1.27 1.36 1.22 1.09 1
3 PNB 0.58 0.95 1.03 1.14 1.28 1.00 2
4 BOI 0.53 0.65 0.72 0.79 0.70 0.68 5
5 CB 0.56 0.74 0.90 1.28 1.17 0.93 3
AnalysisandInterpretation
Higher the net prot, beer is the earning potential of the bank. The above table
shows that Bank of Baroda is leading in net prot to assets ratio with 1.09 followed
by Punjab National Bank with 1.00. It means that both the banks are earning good
amount of return on their assets. Whereas, the condition for Bank of India is Poor.
The earning potential of Bank of India is 0.68 like half of that of Bank of Baroda.
4.4.3 Percentage Change in Net Prot
Table4.4.3
ShowingPercentageChangeinNetProtofSelectedBanks
SR
No.
Banks Percentage Change in Net Prot (%)
2014 2013 2012 2011 2010 Average Rank
1 SBI -20.89 16.77 43.6 -8.93 5.11 5.53 3
2 BOB 4.09 -8.47 18.38 39.46 33.36 15.36 1
3 PNB -26.99 -1.41 9.85 15.16 24.26 4.17 4
4 BOI 6.03 3.49 5.18 42.26 -42.11 3.37 5
5 CB -10.85 -11.06 -15.17 34.49 46.90 8.46 2
AnalysisandInterpretation:
A lot of uctuation have been found in the Net prots of all the ve banks for ve
years but the negative uctuation was less for Bank of Baroda i.e. why Bank of
Baroda leads in Average change in Net prots with the highest ratio of 15.36% and
currently is in prots. Whereas, Punjab National Bank and Bank of India has got
bigger uctuation and stands at last with the ratio of 4.17 and 3.37%. Canara Bank
Financial Performance Analysis of Selected Public Sector Banks… 4341
is in continuous losses from 3 years though it ranks second. Beside the uctuations,
three banks, State Bank of India, Punjab National Bank, and Canara Bank is in
losses currently.
4.5 Liquidity
4.5.1 Liquid Assets to Total Assets
Table4.5.1
ShowingLiquidAssetstoTotalAssetsofSelectedBanks
SR
No.
Banks Liquid Assets to Total Assets (%)
2014 2013 2012 2011 2010 Average Rank
1 SBI 6.97 6.80 6.97 9.43 8.40 7.71 4
2 BOB 16.99 13.14 14.38 14.04 12.86 14.28 1
3 PNB 8.15 5.66 6.4 7.78 7.98 5.19 5
4 BOI 10.68 12.13 9.15 10.67 11.36 10.80 2
5 CB 8.9 8.3 5.45 9.07 5.4 8.22 3
AnalysisandInterpretation
Higher the Liquidity, Beer is the solvency and working capital of the banks, which
is required for day to day operations. Bank of Baroda stands at rst position with
Liquid assets of 14.28% followed by Bank of India with 10.80%. Whereas Punjab
National Bank and State Bank of India has low liquid assets of 5.19 and 7.71%.
It means that Bank of Baroda and Bank of India is more solvent and has great
potential to full demand than State bank of India and Punjab National Bank.
4.5.2 Liquid Assets to Total Deposits
Table4.5.2
ShowingLiquidAssetstoTotalDepositsofSelectedBanks
SR
No.
Banks Liquid Assets to Total Deposits (times)
2014 2013 2012 2011 2010 Average Rank
1 SBI 0.09 0.09 0.09 0.12 0.11 0.10 3
2 BOB 0.19 0.15 0.17 0.165 0.15 0.165 1
3 PNB 0.10 0.07 0.07 0.09 0.09 0.084 5
4 BOI 0.13 0.14 0.11 0.13 0.14 0.13 2
5 CB 0.10 0.09 0.086 0.10 0.084 0.092 4
4342 • Jaspreet Kaur, Manpreet Kaur and Dr. Simranjit Singh
AnalysisandInterpretation
Higher the Liquid Assets to Total Deposits, Higher is the amount of cash available
for the Depositors of the banks. The above table state that Bank of Baroda and Bank
of India is Keeping 17% or 0.17 times and 13% or 0.13 times of the money for their
depositors to full their demand, Whereas Canara Bank and Punjab National Bank
has kept only 9.2% and 8.4% cash. It states that Bank of Baroda and Bank of India has
greater capacity to full the demand and advance the money to the people.
4.5.3 Liquid Assets to Demand Deposits
Table4.5.3
ShowingLiquidAssetstoDemandDepositsofSelectedBanks
SR
No.
Banks Liquid Assets to Demand Deposits (%)
2014 2013 2012 2011 2010 Average Rank
1 SBI 118.59 106.78 105.25 100.74 84.00 103.47 5
2 BOB 225.43 201.69 223 217 189 211.22 2
3 PNB 144.76 92.4 104.51 110.90 101.56 110.83 4
4 BOI 283.91 270.82 196.4 222.67 198 234.36 1
5 CB 253 236.24 192.7 125.83 108.06 183.17 3
AnalysisandInterpretation
Higher the liquid assets to demand deposits, beer ability to full the short term
or emergency demand of the customer or the depositors. Bank of India stands at
rst position with 234.36% followed by Bank of Baroda with 211.22% which shows
that both the banks have greater ability to full the demand of the depositors.
On the other hand Punjab national Bank and State Bank of India has very low
liquidity ratio of 110.83 and 103.47, and has taken the back seat in Liquid assets to
Demand Deposits.
4.5.4 Government Securities to Total Assets
Table4.5.4
ShowingGovernmentSecuritiestoTotalAssetsofSelectedBanks
SR
No.
Banks Government Securities to Total Assets (%)
2014 2013 2012 2011 2010 Average Rank
1 SBI 12.86 12.76 19.86 19.40 21.95 15.37 4
2 BOB 15.01 19.08 16.03 15.2 18.51 15.17 5
Financial Performance Analysis of Selected Public Sector Banks… 4343
3 PNB 20.22 22.35 21.79 20.89 22.07 21.46 2
4 BOI 16.80 15.49 19.09 19.7 21.61 18.94 3
5 CB 21.88 24.57 23.56 21.05 24.05 23.02 1
AnalysisandInterpretation
Higher is the government securities, lesser is the risk, more are the safe assets.
Canara Bank and Punjab National Bank has Government securities of 23.02% and
21.46% in proportion of total assets. It states that Assets of these two banks are on
safer side and less chances of geing insolvent. Whereas, State Bank of India and
Bank of Baroda has lesser Government securities with 15.37 and 15.17% of assets.
It states that these banks Prefers to take more risk.
4.5.5 Approved Securities to Total Assets
Table4.5.5
ShowingApprovedSecuritiestoTotalAssetsofSelectedBanks
SR
No.
Banks Approved Securities to total assets (%)
2014 2011 2012 2011 2010 Average Rank
1 SBI 0.16 0.13 0.11 0.16 0.20 0.152 2
2 BOB 0.16 0.16 0.08 0.17 0.30 0.174 1
3 PNB 0.05 0.04 0.04 0.09 0.16 0.076 3
4 BOI 0.025 0.021 0.039 0.079 0.16 0.064 4
5 CB 0.033 0.035 0.024 0.09 0.13 0.062 5
AnalysisandInterpretation
Higher is the Approved securities, lesser is the risk, more are the safe assets. Bank
of Baroda and State Bank of India has approved securities of 0.174% and 0.152%
in proportion of total assets. It states that Assets of these two banks are in safer
hands, Canara Bank and Bank of India has lesser Approved securities with 0.062
and 0.064% of assets. It states that these banks Prefers to take more risk.
5. FINDINGS
According to research conducted by CAMEL Model for Leading Five Public Sector
Banks It is found out that:
4344 • Jaspreet Kaur, Manpreet Kaur and Dr. Simranjit Singh
Bank of Baroda has performed beer in Capital Adequacy followed by Punjab
National Bank. It states that both these Banks has good risk management system
and has greater capacity to meet’s its additional capital needs. The Findings of our
study are similar to Lakhtaria (2013)
Bank of Baroda has good quality assets and performs beer than other four
Banks followed by Bank of India. It shows that these two banks have managed
their Assets and NPA’s in a beer way and has invested their assets at right place.
The Findings of our study are similar to Ravinder and Prasad (2012), Aspal and
Malhotra (2013), Lakhtaria (2013).
Bank of Baroda has beer management eciency and ranks at rst position
followed by Punjab National Bank. So, both these banks has greater productivity
and good working management and takes the corrective measures if any conict
occurs. The Findings of our study are similar to Lakhtaria (2013).
Bank of Baroda has beer earning capacity and secures rst position in earning
quality followed by Punjab National Bank. It shows that both these banks have
capacity to earn regular cash inows and can earn beer prots in future so as to
sustain in the market. The Findings of our study are similar to Lakhtaria (2013).
Bank of Baroda has secured rst position in Liquidity followed by Bank of
India. It shows that both these banks have invested their cash in High return
securities and has good amount of working capital. The Findings of our study
are similar to Ravinder and Prasad (2012), Aspal and Malhotra (2013), Lakhtaria
(2013), Gupta (2014).
6. CONCLUSION
The results of study shows that Bank of Baroda is leading in all the aspects of
CAMEL followed by Punjab National Bank in Capital Adequacy, Management
eciency and Earning capacity and Bank of India in Asset Quality, which is
almost Similar to Lakhtaria (2013), whereas State Bank of India has not performed
well according to the study though it hold highest amount of assets and cash
reserves. Canara Bank has always remained in the middle position. There has
been a signicant change in the performance of these banks throughout the years.
Bank of Baroda has really performed well. Due to radical change in the banking
sector in the recent years Central banks all around the world has increases their
supervision quality and techniques. According to the Study conducted by Aspal
and Malhotra (2013), Punjab National Bank Leads in Earning Quality and Canara
Bank in Capital Adequacy but as the time passes both Bank of Baroda and Punjab
National Bank shares rst position in earning quality as shown in the study of
Lakhtaria (2013) and as the performance of Bank of Baroda increases it surpasses
Financial Performance Analysis of Selected Public Sector Banks… 4345
Punjab National Bank in earning quality and Canara bank in Capital Adequacy.
If we compare the overall Performance of the Selected Banks, study is similar to
every study. Whether it is Lakhtaria (2013), Aspal and Malhotra (2013) or Gupta
(2014), in which Bank of Baroda has performed beer than all other selected banks.
But due to passage of time there is uctuations in the performance of other four
Banks.
7. SUGGESTIONS
1. The Study recommends that State Bank of India needs to improve its Assets
Quality, Management eciency and Liquidity. Similarly Punjab National Bank
has to improve its Liquidity and Assets Quality and Bank of India should focus
on Capital Adequacy and Earning Quality.
2. Due to Passage of time, the ranking of Canara Bank and Punjab National
bank has decreased, which is a negative sign for the Banks. They both need to
increase their overall productivity and eciency in order to compete with the
tough banks like Bank of Baroda.
References
Aspal P.K. (2013), A Camel Model Analysis of State Bank Group”, World Journal of Social
Sciences, Vol.3, No.4 accessed from www.econjournals.com /index.php/ije/ article/
view le /814 /pdf on 20-Sept-2014.
Chaudhary G. (2014), “Performance Comparison of Private Sector Banks with the Public
Sector Banks in India”, International Journal of Emerging Research in Management &
Technology, ISSN: 2278-9359, Vol. 3, No. 2, accessed from www.ermt.net /docs/papers /
Volume_3/2.../V3N2-114.pdf on 20-Sept-2014.
Desai D.S. (2013), “Performance Evaluation of Indian Banking Analysis”, International
Journal of Research in Humanities and Social Sciences, ISSN: 2320-771x, Vol. 1, No. 6
accessed from raijmr.com/wp content/uploads/2013/10/7_30-36-Dhaval-S.-Desai.pdf
on 20Sept-2014.
Gupta R. (2014), “An Analysis of Indian Public Sector Banks Using Camel Approach”, IOSR
Journal of Business and Management, E-ISSN: 2278-487x, Vol. 16, No. 1 accessed from
iosrjournals.org/iosr-jbm/papers/Vol16-issue1/...4/L0161494102.pdf on 20-Sept-2014.
Hui, X. (2012), A Comparison of Financial Performance of Commercial Banks: A Case
Study of Nepal”, African Journal of Business Management, ISSN: 1993-8233, Vol. 6, No.
25 accessed from hp://www.academia.edu/5057138/A_Comparison_of_Financial_
Performance_in_the_Banking_Sector_Some_Evidence_from_Omani_Commercial_
Banks on 20-Sept-2014.
4346 • Jaspreet Kaur, Manpreet Kaur and Dr. Simranjit Singh
Kumar M.A. (2012), “Analyzing Soundness in Indian Banking: A Camel Approach”,
Research Journal of Management Sciences, ISSN: 2319–1171, Vol. 1, No. 3 accessed from
hps://www.isca.in/IJMS/Archive/v1i3/2.ISCA-RJMS-2012-028.pdf on 22-Sept-2014.
Lakhtaria N. J. (2013), A Comparative Study of the Selected Public Sector Banks
through Camel Model”, Indian Journal of Research, Vol. 2, and No. 4 accessed from
theglobaljournals.com/paripex/le.php?val=April_2013...113f4... on 22-Sept-2014.
Malhotra, P. K. (2013), “Performance Appraisal of Indian Public Sector Banks”, World
Journal of Social Sciences, Vol. 3. No. 3 accessed from www.wjsspapers.com static/
documents/May/2013 /7.%20Parvesh.pdf on 23-Sept-2014.
Mishra M.K. (2011), “Comparative Study of Public and Private Sector Banks in India:
Analysis of Camel and DEA Approach”, International Academic Research Journal of
Economics and Finance, ISSN: 2227-6254 Vol. 3, No. 1 accessed from acrpub.com/.../
Dr.%20Manoj%20 Kumar% 20Mishra-IARJEF-June14.pdf on 22-Sept-2014.
Prasad K.V.N. (2012),A Camel Model Analysis of Nationalized Banks in India”, International
Journal of Trade and Commerce-Iiartc, ISSN: 2277-5811, Vol. 1, No. 1) accessed from
sgsrjournals. com/paperdownload/3.pdf on 20-Sept-2014.
Prasad, D. R. (2011), “Evaluating Performance of Regional Rural Banks: An Application
of Camel Model”, Journal of Arts, Science & Commerce, ISSN: 2231-4172, Vol. 2, No. 4
accessed from www.researchersworld.com/vol2/issue4/Paper_7.pdf on 20-Sept-2014.
Sangmi M. (2010), Analyzing Financial Performance of Commercial Banks in India:
Application of Camel Model”, Pak. J. Commerce. Soc. SCI, Vol.4, No.1 accessed from
www.jespk.net/publicat ions/28.pdf on 23-Sept-2014.
Sharma R. (2014), “Performance Analysis of Top Indian Banks through Camel Approach”,
International Journal of Advanced Research, ISSN: 2278-6236, Vol. 3, No. 7 accessed from
www.garph.co.uk/IJARMSS/July2014/8.pdf on 21-Sept-2014.
Shar A.H. (2010), “Performance Analysis of Banking Sector in Pakistan: An Application
of Bankometer”, International Journal of Business and Management, ISSN: 1833-3850,
Vol.5, No.9 accessed from ccsenet.org/journal/index.php/ijbm/article/download/6916/5486
on 24Sept-2014.
Siddiqui, M.H. (2014), “Performance Evaluation of the Banking Sector in Bangladesh: A
Comparative Analysis”, Business and Economic Research, ISSN: 2162-4860, Vol. 4, No.
1 accessed from hp://www.macrothink.org/journal/index.php/ber/article/view/4672
on 24Sept-2014.
Zumwalt, J.K (2002), “The Changing Relationship between Camel Ratings and Bank
Soundness during the Indonesian Banking Crisis”, Review of Quantitative Finance and
Accounting, ISSN: 0924-865x, Vol. 19, No. 3 accessed from link.springer.com/article/10.
1023%2FA%3A1020724 907031 on 24-Sept-2014.
Financial Performance Analysis of Selected Public Sector Banks… 4347
Websites:
• List of all Public sector banks in India accessed from hp://www.iba.org.in/
viewmembanks.asp?id=1 on 27-Sept-2014.
• List of all Private sector banks in India accessed from www.iba.org.in/viewmembanks.
asp? Id=3on 27-Sept-2014.
• All the Annual Reports of Selected Public Sector Banks from 2009-2014 accessed from
www.moneycontrol.com on 01-Feb-2015.
4348 • Jaspreet Kaur, Manpreet Kaur and Dr. Simranjit Singh
... Regulation is a necessary indicator for any successful management to know the functions it performs well for the purpose of controlling, measuring and controlling risks to ensure that the commercial bank exercises its activities in a safe and sound manner and in line with regulations and laws (Al-Mousawi & Al-Safi, 2019). as for the fifth and last indicator adopted by the (PATROL) system is bank liquidity, which represents the bank's ability to fulfill its obligations urgently by converting part of its assets into liquid cash quickly and without loss (Kaur et al., 2015). ...
Article
Full-text available
This paper describes the financial performance of the banking sector in Iraq using the PATROL early warning model. The research found the strengths and weaknesses in bank operations and forecasted the financial crises using data from 2018 to 2022 to enhance performance. The indicators included capital adequacy, credit risk, profitability, organizational efficiency, and liquidity, with performance rated on a scale from "very good" to "poor." Related findings proved that the Iraqi banks would be entirely successful in financial performance regarding most indicators and scaling-high in capital adequacy, profitability, organization, and liquidity, in accordance with sound management and robust operations. However, credit risk posed challenges because the assets demonstrated lower quality compared to other indicators. Findings from the research suggest the importance of the PATROL model in guiding regulatory authorities in monitoring financial health, correcting imbalances, and improving stability. Overall, the empirical study tends to validate the effectiveness of the model as a strategy for improving and assessing financial outcomes in the banking sector. The research study has been geared towards the analysis of the financial performance of the banking sector in Iraq using the PATROL early warning model. The research found strengths and weaknesses in bank operations and predicted the financial crises using data from the years 2018 to 2022 to enhance performance. The indicators included capital adequacy, credit risk, profitability, organizational efficiency, and liquidity which were rated with respect to performance on a scale from "very good" to "poor." Related findings proved that the Iraqi banks would be entirely successful in financial performance regarding most indicators and scaling-high: capital adequacy, profitability, organization, and liquidity according to sound management and robust operations. However, credit risk posed challenges, which showed lower quality assets compared to other metrics. The research points out the usefulness of the PATROL model in guiding regulatory authorities to monitor the financial health, correct imbalances, and improve stability. In general, the empirical study seems to affirm the efficacy of the model as a scheme for assessing and improving financial outcomes not just for the banking sector, but for all sectors.
... Price Earnings Ratio of State Bank of India is higher than other banks and Fixed Asset Turnover ratio of SBI is lower than Oriental Bank of Commerce. Jaspreet Kaur1, Manpreet Kaur and Simranjit Singh (2015) [10] , studied the financial performance of public sector banks with CAMEL Model. As per their study, they have reported that, Canara Bank always keeps a medium position than State Bank of India. ...
... Many research works focused on examining the performance of private sector banks and ranked various banks based on their performance (Garg, 2022;Biswas & Bhattacharya, 2020;Kumar & Malhotra, 2017). At the same time, few authors focused on only public sector banks and their performance (Kaur et al., 2015;Misra & Aspal, 2013). Along similar lines, many authors focused on comparing the financial performance of public and private sector banks and found that private sector banks outperformed public sector counterparts on all parameters (Saikrishna & Varghese, 2020;Mayakakkannan & Jayasankar, 2020;Nanthini & Shanmugam, 2020;Panboli & Birda, 2019;Shukla, 2015). ...
Article
Small Finance Banks (SFBs) are specialised banking institutions incorporated to serve the unbanked, small and underserved customers. Their primary motive is to improve financial access by providing access to essential financial services. This article examines the performance of ten SFBs in India over four years. The CAMELS model has been applied for performance analysis, which provides performance and ranking of various SFBs using the model’s six parameters: Capital adequacy, Asset quality, Management, Earning quality, Liquidity and Sensitivity. This study will help identify SFBs in financial distress, which will be helpful in timely action for their revival. Financial analysts and credit rating agencies can also use the comparative performance of these banks to frame their opinion or ratings. The common public, including customers and investors, can frame their short-term and long-term investment decisions based on the performance and ranking of these institutions. Furthermore, a proper assessment of these banks is needed as their good performance can ensure that formal credit availability reaches the grassroots level.
... Moreover, financial performance is also defined as the effectiveness of mobilising and using the financial resources available (Amirah et al., 2018). Meanwhile, Kaur and Kaur (2016) delineated financial performance as an organisation's ability to achieve its goals at the lowest possible level. The survivability of companies in competitive business settings largely rely on their financial performance. ...
Article
Full-text available
Purpose: The purpose of this study is to examine the impact of Audit Committee Quality on Financial Performance in the Iraqi Banking Sector to improve Financial Performance. The agency theory serves as the study’s theoretical underpinning. Design/methodology/approach: The major research design was a quantitative method employing Structural Equation Modelling (SEM). SmartPLS3 was utilized to examine data from a set of respondents who were chosen using a purpose random sampling technique which included the CEO, CFO, accountants, and auditors. The survey questionnaire was disseminated to 386 people, and the collected data were evaluated using a measurement model. Findings: According to the findings, the Audit Committee Components have a considerable impact on financial performance. The relationships were found to be positive and significant whereby Expertise (β =7.422, p0.05), Independence (β =4.549, p 0.05), Size (β=3.736, p0.05), and Meetings (β=3.064, p0.05). The Audit Committee component of Expertise was found to have the most significant impact on financial performance. Research, Practical & Social implications: Implications-wise, this study indicates the need for Iraqi banks to improve the quality of their audit committees towards enhancing their financial performance, also Central Bank should work side by side with Iraqi universities to continue research on the role of Audit Committees. Originality/value: This study provides an overview of the impact of the quality of the audit committee on financial performance and the extent of its importance in the Iraqi banking sector to reduce cases of manipulation and errors in the financial statements of banks. The study recommends the use of independent audit committees to improve financial performance in the Iraqi liquidation sector.
... Definition 3: Public Sector Banks are the banks whose majority of stakes are held by the state or central government (Jha, 2018). Definition 4: The banks in which the Govt. of India holds more than 50% of the total stake are called Public Sector Banks (Kaur, 2015). ...
Article
Banking industry is the pivot around which the whole economy of a country revolves around. In India, banking industry play a great role and thus is one of the fastest growing industries. The Indian government has introduced various banking reforms, with the latest being the mega mergers of public sector banks. Due to such reforms many changes have been seen in this industry, be it financial or infrastructural. In this context, a study has been done to evaluate the financial performance of PNB, India’s Second largest public sector bank and ICICI, India’s second largest Private Sector Bank for the last 6 years from 2017-2018 to 2022-2023. The CAMEL model, a framework extensively used in the banking industry, is used in this study to perform an extensive comparison of two well-known banks functioning in India's vibrant financial ecosystem. Study is based on primary as well as secondary data collected from the annual reports of respective banks for the above-mentioned period. As per this study, it can be concluded that ICICI being a private player has been performing well in comparison to PNB. These comparison findings have major implications for Indian banking investors, regulators, and policymakers. In conclusion, the financial comparison utilizing the CAMEL model provides a good view on PNB and ICICI's strengths and weaknesses.
Article
This study attempts to make a comprehensive analysis of the financial performance of the State Bank of India (SBI), which is one of the country's largest and oldest financial institutions. In order to carry out the study, the CAMEL Model of performance analysis has been used. The CAMEL model is a comprehensive framework used to assess the overall financial strength and resilience of a bank. It evaluates various factors including Capital adequacy, Asset quality, Management quality, Earnings performance, and Liquidity situation. The study utilizes quantitative approaches to evaluate the financial performance of SBI over the last five financial years. The bank's strength in terms of capital structure, risk management, operational efficiency, and profitability is assessed by analyzing financial ratios. The objective of this study is to offer significant insights into SBI's financial performance pinpoint areas of proficiency and deficiency, and propose strategic enhancements. The analysis was done based on the secondary data that have been collected from Annual reports of the State Bank of India. After analyzing the bank’s last five financial years’ performance using the CAMEL model, the overall financial health of the bank is good. However, the bank needs to focus on Operating Profit as it is not increasing. it has maintained an average from the last five financial years. Keywords: SBI, Financial Performance Analysis, CAMEL Model, Bank
Article
Banking industry is the pivot around which the whole economy of a country revolves around. In India, banking industry play a great role and thus is one of the fastest growing industries. The Indian government has introduced various banking reforms, with the latest being the mega mergers of public sector banks. Due to such reforms many changes have been seen in this industry, be it financial or infrastructural. In this context, a study has been done to evaluate the financial performance of PNB, India’s Second largest public sector bank and ICICI, India’s second largest Private Sector Bank for the last 6 years from 2017-2018 to 2022-2023. The CAMEL model, a framework extensively used in the banking industry, is used in this study to perform an extensive comparison of two well-known banks functioning in India's vibrant financial ecosystem. Study is based on primary as well as secondary data collected from the annual reports of respective banks for the above-mentioned period. As per this study, it can be concluded that ICICI being a private player has been performing well in comparison to PNB. These comparison findings have major implications for Indian banking investors, regulators, and policymakers. In conclusion, the financial comparison utilizing the CAMEL model provides a good view on PNB and ICICI's strengths and weaknesses.
Article
Full-text available
Banking sector had played a revolutionary change in our reforming sector towards the economic growth, henceforth it is the backbone for economy and it is one of the key indicators to analyse the level of development of any country. Sound financial health of a bank is the guarantee not only to its depositors but is equally important for the shareholders, employees and whole economy as well. CAMEL a system of rating of banking evaluates the basis of critical dimensions relating to its operations and performance. The dimensions namely Capital Adequacy, Asset Quality, Management Efficiency, Earnings Quality and Liquidity. The present study covers three private banks in India and CAMEL ratios are used to evaluate their performance and efficiency to come to a conclusion that which bank is in leading position in performance and efficiency
Article
This research investigates the determinants of financial performance in Primary Cooperative Agriculture Development Banks operating in Punjab, India. By analysing the impact of Capital Adequacy, Asset Quality, Management Efficiency, Earnings, and Liquidity on Return on Assets (ROA), the study aims to offer insights into enhancing financial health and regional economic growth. Using a panel regression model, financial data from multiple periods and banks are analysed. Key findings indicate that maintaining adequate capital positively influences ROA, while prudent lending practices are crucial for asset quality maintenance. Efficient management enhances ROA, and higher earnings and effective asset use contribute to profitability. While liquidity management’s impact is limited, its role in meeting short-term obligations remains significant. This study provides actionable insights for banks and policymakers, emphasising capital reserves, prudent lending, operational efficiency, and asset utilisation. Effective liquidity management remains important. This research contributes uniquely to understanding financial determinants in cooperative banks, guiding decision-making, policy formulation, and promoting agricultural development and economic growth.
Article
Full-text available
Banking sector plays an important role in the economic development of a country especially for Bangladesh, a sound and efficient banking system is one of the most important preconditions to achieve economic development. At present, a total of 47 banks (4 SCBs, 4 DFIs, 30 PCBs and 9 FCBs) having 7246 branches are operating in Bangladesh with Tk. 4411.98billion total assets and Tk. 3329.08 billion deposits. The performance of 4types of banks needs to be compared with each other as well as the overall performance of banking sector needs to be compared with other countries. Quantitative comparison can be done on the basis of CAMEL ratio. CAMEL ratios mainly indicate the adequacy of the risk based capital, non-performing loan position, expenditure-income ratio, return on assets (ROA), return on equity (ROE), net interest income (NII), writing of debt, liquid assets, excess liquidity, etc. The study compares the 4 types of bank's time series performance on the basis of selected CAMEL ratios. This thesis paper is divided into five chapters. Chapter one comprises introduction. Chapter two includes overview of banking sector of Bangladesh. Performance of banking sector is contained in chapter three. Chapter four covers analysis and interpretation. The last chapter is about findings and conclusion.
Article
Full-text available
Ability to predict which bank is vulnerable to financial distress is of critical importance to investors, creditors,accountholders and many other stakeholders. An effort has been made to develop and evaluate a new modelcalled ‘bankometer’. To confirm the accuracy of bankometer, it has been applied on individual banks coveringthe period 1999-2002 for gauging the solvency of each bank in Pakistan and the results has been compared withCAMEL and CLSA-stress test. This is an initial attempt to develop a scale which could be applied at global leveland prescribes a procedure to gauge the vulnerability of an individual bank.
Article
Full-text available
The objective of this paper is to analyze the performance of 12 public and private sector banks over a period of eleven years (2000-2011) in the Indian banking sector. For this purpose, CAMEL approach has been used and it is established that private sector banks are at the top of the list, with their performances in terms of soundness being the best. Public sector banks like Union Bank and SBI have taken a backseat and display low economic soundness in comparison.
Article
Full-text available
Sound financial health of a bank is the guarantee not only to its depositors but is equally significant for the shareholders, employees and whole economy as well. As a sequel to this maxim, efforts have been made from time to time, to measure the financial position of each bank and manage it efficiently and effectively. In this paper, an effort has been made to evaluate the financial performance of the two major banks operating in northern India .This evaluation has been done by using CAMEL Parameters, the latest model of financial analysis. Through this model, it is highlighted that the position of the banks under study is sound and satisfactory so far as their capital adequacy, asset quality, Management capability and liquidity is concerned.
Article
The progression of an economy is significantly dependent upon deployment as well as optimum utilization of resources and most importantly operational efficiency of the various sectors, of which banking sector plays a very vital role. Banking sector helps in stimulation of capital formation, innovation and monetization in addition to facilitation of monetary policy. It is imperative to carefully evaluate and analyse the performance of banks to ensure a healthy financial system and an efficient economy. The present study attempts to evaluate the performance of public sector banks in India using CAMEL approach for a five year period from 2009-13.
Article
The objective of this study was to compare the financial performance of different ownership structured commercial banks in Nepal based on their financial characteristics and identify the determinants of performance exposed by the financial ratios, which were based on CAMEL Model. Eighteen commercial banks for the period 2005 to 2010 were financially analyzed. In addition, econometric model (multivariate regression analysis) by formulating two regression models was used to estimate the impact of capital adequacy ratio, non-performing loan ratio, interest expenses to total loan, net interest margin ratio and credit to deposit ratio on the financial profitability namely return on assets and return on equity of these banks. The results show that public sector banks are significantly less efficient than their counterpart are; however domestic private banks are equally efficient to foreign-owned (joint-venture) banks. Furthermore, the estimation results reveal that return on assets was significantly influenced by capital adequacy ratio, interest expenses to total loan and net interest margin, while capital adequacy ratio had considerable effect on return on equity.
Article
The economic importance of banks to the developing countries may be viewed as promoting capital formation, encouraging innovation, monetization, influence economic activity and facilitator of monetary policy. Performance evaluation of the banking sector is an effective measure and indicator to check the soundness of economic activities of an economy. In the present study an attempt was made to evaluate the performance & financial soundness of State Bank Group using CAMEL approach. It is found that in terms of Capital Adequacy parameter SBBJ and SBP were at the top position, while SBI got lowest rank. In terms of Asset Quality parameter, SBBJ held the top rank while SBI held the lowest rank. Under Management efficiency parameter it was observed that top rank taken by SBT and lowest rank taken by SBBJ. In terms of Earning Quality parameter the capability of SBM got the top rank while SBP was at the lowest position. Under the Liquidity parameter SBI stood on the top position and SBM was on the lowest position. SBI needs to improve its position with regard to asset quality and capital adequacy, SBBJ should improve its management efficiency and SBP should improve its earning quality.
Article
The strength of economy of any country basically hinges on the strength and efficiency of financial system, which, in turn, depends upon a sound and solvent banking system. Banks needs to be more closely watched than any other type of economic unit. The regulators have recommended bank’s supervision through CAMEL rating model to assess the performance of banks, which is better than the earlier systems. The present study aims to measure the financial performance of Indian public sector banks excluding State Bank Group for the period of 2006-11. The study found that Bank of Baroda was at the first position with overall composite ranking average of 6.05 due to its better performance in the areas of liquidity and asset quality, closely followed by Andhra Bank with overall composite ranking average of 6.15 because of its strength in the spheres of management efficiency, capital adequacy and asset quality. United Bank of India hold the bottom most rank with overall composite ranking average of 14.60 due to management inefficiency, poor assets and earning quality. The study recommends that United Bank of India has to improve its management efficiency, assets and earning quality. Similarly Bank of Maharashtra should take necessary steps to improve its liquidity position and management efficiency.
Article
Significance of performance evaluation in an organization, for sustainable growth and development, has been recognized since long. This calls for a system that first measures and evaluates the performance, and then brings out the strengths and weaknesses of the organization for the purpose of further improvement. It has been observed that the evaluation of the financial performance alone is not sufficient for the present day organizations. The situation is not different even for financial institutions like banks. This paper attempts to describe the need for more modern performance evaluation systems for Indian banks.