Abstract
The study evaluated the financial performance of three listed commercial banks in Botswana for the period 2011-2015 applying the CAMEL model. The study used the secondary data sourced from the annual reports of the listed banks. Results indicate that selected banks were highly leveraged and that their liquidity position was sound. The correlation analysis revealed that Earning per share had a significant positive correlation with liquidity ratio of total customer deposits to total assets and that leverage ratio was significantly negatively correlated to the ratio of equity capital to assets. Other CAMEL ratios were not significantly correlated to Earnings Per Share. The regression analysis showed that Capital adequacy, Asset quality, Earning ability and Managerial efficiency had no significant relationship with selected banks’ performance measured in terms of Earnings per share. On the other hand, the Liquidity position of these banks was found to be significantly related to the performance of selected banks at 5% significance level. The findings also indicated that, overall, the selected banks performed well during the study period in terms of most of the parameters of CAMEL model with adequate capital and assets when compared to benchmarks. The earning capacity of the selected banks was also on the increase. The findings of this study will be helpful to the management of selected banks in making appropriate managerial decisions.
Highlights
Economic prosperity is a sign of success of a country and this is achieved through proper and efficient utilization of country’s resources
SUMMARY OF FINDINGS To sum up, the correlation analysis has shown that none of the CAMEL ratios except Liquidity ratio has any significant correlation with Earning Per share
The aim of the study is to evaluate the performance of listed commercial banks in Botswana using the CAMEL model for the period 2011-2015
Summary
Economic prosperity is a sign of success of a country and this is achieved through proper and efficient utilization of country’s resources. Reliability, Profitability and Liquidity are critical in the assessment of performance of an organization and in that context, CAMEL model which underscores Capital Adequacy, Asset Quality, Management Quality, Earning Ability and Liquidity as criteria for assessment can be taken as a reliable tool to evaluate the soundness of financial firms ((Ghasempour & Salami, 2016; Aspal and Dhawan, 2016). Management Quality: Management efficiency is a decisive component of CAMEL model that measures the strength of a bank It refers to compliance with set standards, ability to respond to the changing environment as well as to the managerial capability and leadership of the bank. CAMEL Rating is one of the widely used tools for judging capital adequacy, asset quality, earnings ability and liquidity of the financial institutions such as commercial banks, by the principal regulators all around the world. The overall indication of the performance of all of the commercial banks operating in Botswana, as assessed by Bank of Botswana (2015, 39) in 2015 using the CAMELS instrument is that they were sound and stable, with only moderate weaknesses
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