Financial Performance Analysis of Commercial Banks in Ethiopia (In Case Of Newly Established

Abstract

This study was focused on the area of financial performance analysis of commercial banks by using CAMEL approach in Ethiopian banking industry. The study was conducted on 8 commercial banks, by collecting data from their annual reports from year 2010 to 2018. The overall objective of this study was to analyze the effects of CAMEL variables, bank size on profitability measurements of Bank performance, to rank banks included under this study based on their financial performances and this study also aimed to investigate the interconnection between CAMEL ratios with profitability, late and early establishment of banks.. The study used quantitative approach from the three methods of conducting business and social research. This study used BP as dependent variable and bank size and liquidity as independent variable in addition to CAMEL variables. The researcher was used panel data for CAMEL ratios. the part and descriptive part were analyzed by descriptive analysis. Random effect regression analysis was also used to test the hypothesis and to determine the relative importance of each independent variable included in the CAMEL framework to explain dependent variables. During the ranking process by composite CAMEL place which were established later. The econometric analysis showed that, asset quality, management efficiency, liquidity, size of the bank and were significant variables to explain BP, unlike capital adequacy and earning quality which were not significant variable. Similarly, capital adequacy, asset quality, liquidity, and were Insignificant variables to explain BP, but earning quality of the bank were not significant variable to influence BP. In general for banks whose capital adequacy, asset quality, management efficiency and liquidity position were low as compared to peer banks shall inject some capital, improve their asset quality, control their cost and control their liquidity position respectively in order not lose public trust. In connection with their determinant factor to increase return on equity banks shall give special attentions to asset quality, management efficiency, liquidity. Banks shall also concentrate on increasing their total asset by mobilizing deposit and converting the deposit to loan, as total asset or size of the bank is a determinant factor to increase return on asset