CAMEL Analysis of commercial Banks: A comparative Study of Everest Bank Ltd. and Himalayan Bank Ltd.

Abstract

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. This model will be applied to evaluate the performance of two public bank and two private bank for comparison. The data is collected from the annual reports of the banks under study. and ratios are compute and interpreted for all the banks. Camel approach is significant tool to assess the relative financial strength of a bank and to suggest necessary measures to improve weaknesses of a bank.