Performance analysis through CAMEL rating: A comparative study of selected private commercial banks in Bangladesh

CAMEL Rating has been considered as one of the widely used tools for judging capital adequacy, asset quality, management capacity, earnings ability, and liquidity of the financial institutions including commercial banks by the principal regulators all around the world. This paper examines the comparative performance of two leading private sector commercial banks, namely, IFIC and EXIM bank, through CAMEL Rating. The findings of the study reveal that in case of the band ‘capital adequacy’, IFIC Bank's, capital adequacy ratio and leverage ratio show better performance than EXIM Bank, but, in respect of return on equity and net worth protection, IFIC shows poorer performance than the other. With regard to ‘asset quality’, percentage of classified loan of IFIC Bank shows a much stronger performance than EXIM Bank and in relation to ‘ management capacity’, income per share of EXIM bank is higher than IFIC. Further, expenses per employee of EXIM bank is less than the IFIC bank which confirms EXIM bank's better management capacity to deal with administrative and office overheads. With respect to ‘earning ability’, net investment margin of IFIC Bank shows a laudable performance but for other criteria, such as, net profit margin, diversification ratio and earnings per share, EXIM Bank has been showing better performance. Finally, with regard to ‘Liquidity’, loan to deposit ratio and earning assets to deposit ratio of IFIC Bank have been showing excellent performance but liquid asset to total deposit ratio shows poor performance than the EXIM Bank.