FINANACIAL PERFORMANCE OF BERHAN BANK AGAINST THE INDUSTRY AVERAGE USING CAMEL APPROACH

Abstract

This study entitled financial performance analysis is conducted to analyze and evaluate the financial performance of Berhan bank against the industry average of the private commercial banks in Ethiopian based on the CAMEL model approach. Specifically the study: examine the adequacy of capital employed by the banks to absorb unexpected losses; the banks' asset quality to generate interest income, the effect of quality of managements on the financial performance of the banks, the quality of earnings sustainability and growth, measure the liquidity of the bank on fulfilling its respective obligations and to evaluate the overall financial performance of Berhan bank against the industry average. The data relevant to meet the objective has been collected from the audited annual financial reports of Berhan bank and private commercial banks in Ethiopia from the year 2015-2019. The data was analyzed using descriptive statistical methods by using CAMEL ratio-based model to measure, describe and analyze the financial performance of banks. The finding of the study indicated that, Berhan Bank is holds above a minimum capital adequacy ratio recommended by experts in the banking sector. Therefore, Berhan Bank should maintain the required capital and diversify their tied up capital. Finally based on the research findings, the study makes the recommendations that Berhan Bank needs to focus on their credit risk management capacity, Income diversification, divert their attention towards maintaining the proper mix of non-interest bearing assets which can generate fee incomes and their loan exposures and there should also be control over overhead costs.