Financial Performance Analysis of Joint Venture Commercial Banks of Nepal in the Framework of CAMEL

Abstract

The study is to examine the Financial Performance of Commercial Bank on the Basis of CAMEL framework. Financial Performance measured by ROA and ROE 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 Study shows that the capital adequacy ratio, NPL to total capital ratio, staff expenses ratio, Earnings per share, total loan to total deposit ratio which indicates the CAMEL framework has been satisfactory for joint venture banks of Nepal. There is significant impact of CAMEL on financial performance. The R value of .927 indicates strong positive relationship between CAMEL and ROA. Similarly, R-square value of 0.860 shows that the independent variables explain 86% of the variance in the dependent variable. The R value of .927 indicates strong positive relationship between CAMEL and ROE. Similarly, R-square value of 0.850 shows that the independent variables explain 85% of the variance in the dependent variable. This means that CAMEL influence the financial performance to a large extent.