Camel analysis of commercial banks in Nepal: A comparative study of Himalayan Bank Limited and Nepal SBI Bank Limited

Abstract

Banks are the important players in economy of any country. The aim of this dissertation is to analyze the financial performance of two selected Banks (Nepal SBI Bank Limited and Himalayan Bank Limited) over the period of five years (2011/12-2019/20) in Nepalese Banking Sector. Although a complete turnaround in banking sector performance is not expected until the completion of reforms, signs of improvement are visible in some indicators under the CAMEL framework. Under this bank is required to enhance capital adequacy, strengthen asset quality, improve management, increase earnings and reduce sensitivity to various financial risks. Amongst these reforms and restructuring, the CAMELS Framework has its own contribution to the way modern banking is looked up on now. The attempt here is to see how various ratios have been used and interpreted to reveal a bank’s performance and how this particular model encompasses a wide range of parameters making it a widely used and accepted model in today’s scenario. In today’s scenario, the banking sector is one of the fastest growing sector and a lot of funds are invested in Banks. There are so many models of evaluating the performance of the banks, one of the model is the CAMEL Model to evaluate the performance of the banks; i.e. Capital, Assets, Management, Earnings and Liquidity. Using the data sets published by the banks in their annual report and NRB supervision annual report. The analysis of financial performance conducted on the basis of publicly available financial data concluded that the sampled banks are strong on their composite rating system. This research is a comparative study of two commercial banks in Nepal, Himalayan Bank Limited and Nepal SBI Bank Limited. The study covers the areas of ownership, management, financial performance, and customer satisfaction. The findings of the study show that Himalayan Bank Limited is more successful than Nepal SBI Bank Limited. They are basically sound in every aspect i.e. Sound in capital adequacy, assets quality, management, earning capacity and liquidity position.