Financial Performance Analysis of Commercial Banks on The Basis of Camel (With Special Reference to Selected Nepalese Commercial Banks)
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Department of Management
Abstract
The study is to examine the Financial Performance of Commercial Bank on the Basis of
CAMEL study in the context of Nepalese commercial Banks. Change in Earning Per Share is
the dependent variable while the capital adequacy ratio (CAR), non-performing loan (NPL),
management efficiency ratio (MER), return on assets (ROA) & cash reserve ratio (CRR) were
chosen as independent variables. The data were collected from the annual reports of selected
banks, annual report of SEBON, report of Nepal Rastra Bank and other official and
unofficial publications. Data were analyzed by using appropriate financial and statistical
tools and the descriptive research design were used. The multiple regression models were
used to test the Financial Performance of Commercial Bank on the Basis of CAMEL. The
regression of CAMEL parameter and its impact on earning shows that beta coefficients are
positive for Non-performing loan Ratio (NPL), Return on Assets (ROA) and Cash Reserve
Ration (CRR). However, beta coefficient is negative for capital adequacy ratio and
management efficiency ratio. In this study, there is positive relationship between the, Return
on Assets and Earning Per share, Non-performing loan and Earning per share and Cash
Reserve Ratio and Earning Per Share. Hence, the result shows that higher the NPL, ROA &
CRR, larger would be earnings and vice-versa. Whereas the beta coefficient of ROA, NPL &
CRR is also significant at 5% level of significance. The relationship between EPS and CAR,
NPL, MER, ROA and CCR of commercial bank is significant. The study found that the
variables CAR, NPL, ROA and CRR is responsible on EPS only by 58.10% and around
41.90% is unexplained. The study recommends that other studies is to be done to identify
other factors which may explain the remaining 41.90% roles on determining the earning
price per share of Nepalese commercial banks.