Abstract
Purpose of this study is to compare the financial performance of state and private sector banks. The banking sector of developing countries is different from the developed countries. The banking sector of Sri Lanka plays a vital role in the Sri Lankan Economy specially commercial banks a re playing a major role in the banking sector of Sri Lanka. There are two types of commercials banks in Sri Lanka such as state and private commercial banks here the private commercial banks can be divided into domestic and foreign private commercial banks. The focus of this study is to compare the financial performance of state and private commercial banks using the Capital Adequacy, Assets Quality, Management Soundness, Earnings, Liquidity (CAMEL) rating system in Sri Lanka 2013-2017. Many studies are conducted in different countries to compare the financial performance of banking sector with the use of various statistical methods. In this study CAMEL rating system used to compare the financial performance of banks, it is one of the quantitative techniques and it is widely used in the current world. State banks should focus to increase their financial performance to compete and survive successfully in the current world and also private commercial banks try to achieve their target financial performance for their long survival.
Highlights
The banking sector plays an important role in Sri Lankan economy as in other countries in the world
This study aim to compare the financial performance of state and private banks using the well-known CAMEL rating system in Sri Lanka which banks were performing during the period 2008-2012
Hatton National Bank ranked as first according to the capital adequacy and earnings financial performance of the bank, Commercial Bank ranked as first according to the liquidity of the banks and Bank of Ceylon ranked as first according to the asset quality of banks
Summary
The banking sector plays an important role in Sri Lankan economy as in other countries in the world. Snagmi and Nazir (2010) analyzed financial performance of major two banks using CAMEL model and highlighted that the position of banks under study sound and satisfactory in terms of their capital adequacy, asset quality, management efficiency and liquidity were concerned. A comparative study on state and private sector commercial banks in Sri Lanka for the time period of 2008-2012 has been conducted by applying CAMEL rating system (Anojan and Nimalathasan, 2014). In the study they have stated that private sector banks are better than state banks in the performance of capital, earning to the asset quality and management soundness of the banks in Sri Lanka. These data may be considered reliable for the study and the independent auditor gross checking all the transaction of the banks in order to draw opinion on the financial statement
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