Introduction

Bangladesh Bank (BB) as Central bank of Bangladesh has the statutory task of regulating and
supervising the banking system of Bangladesh. To play this vital role, BB assesses the overall
performance of the banking system to find out strength and weakness as a whole, as well as the
safety and soundness of each individual banking company. Bangladesh bank conducts its offsite
supervisory function mainly based on CAMEL rating. Presently Risk Based Supervisory
activities are also executed from the end of the central bank with a view to helping the banks so
that they might keep pace with the modern, diversified, most complicated, and vulnerable and
most competitive baking environment. Notable, the Risk Based Ratings derived from risk based
supervisory activities and inspections are reflected in the management Component of CAMELS
rating in order to focus on management Efficiency in managing multiple issues of the banking
business. Financial ratios are use as supervisory tools to find out the overall position of an
individual bank so that Bangladesh Bank can take necessary actions where it is necessary. This
paper will present the financial ratio. All the ratios will be summarized so that anyone can have
the clear concept about each component of CAMEL. Since CAMEL rating result is kept
confidential, stakeholders of a bank are not aware about the actual performance of a banking
company. So, a detailed discussion of financial ratio is required for the mass people. The
performance of EBL $ JBL and TBL Limited needs to be analyzed to focus the strength and
weakness which are to be done in this paper and will compare between them which Bank
performed in more efficient way in the base of CAMEL Rating.
 CAMEL RATING ANALYSIS
CAPITAL ADEQUACY
CAPITAL ADEQUACY It is important for a bank to maintain depositors’ confidence and
preventing the bank from going bankrupt. It reflects the overall financial condition of banks and
also the ability of management to meet the need of additional capital. The following ratios
measure capital adequacy

 Capital Adequacy Ratio (CAR): The capital adequacy ratio is developed to ensure that banks
can absorb a reasonable level of losses occurred due to operational losses and determine the
capacity of the bank in meeting the losses.

 Debt-Equity Ratio (D/E): This ratio indicates the degree of leverage of a bank. It indicates
how much of the bank business is financed through debt and how much through equity.

 Advance to Assets Ratio (Adv/Ast): This is the ratio indicates a bank’s aggressiveness in
lending which ultimately results in better profitability.

 Government Securities to Total Investments (G-sec/Inv): It is an important indicator showing

the risk-taking ability of the bank. It is a bank’s strategy to have high profits, high risk or low
profits, low risk.

Capital Adequacy Ratio (CAR)

Capital Adequacy Ratio (%)

Serial Bank
Number 2013 2014 2015 Average Rank

1. Eastern Bank Ltd 15.3 12.2 16 14.5 1

 2. Trust Bank Limited 11 10.5 9.6 10.3 3

3. Jamuna Bank 11.0 11.3 14.1 12.1 2

Limited

Debt Equity Ratio (Times)

Serial Bank
Number 2013 2014 2015 Average Rank

1. Eastern Bank Ltd 7.6 7.6 8.2 7.8 1

2. Trust Bank Limited 16.0 16.8 17.9 16.9 3

3. Jamuna Bank 12.0 11.9 8.0 10.6 2

Limited

Advances/Assets Ratio (%)

Serial Bank
Number 2013 2014 2015 Average Rank

1. Eastern Bank Ltd 65.2 68.7 68.6 67.5 2

2. Trust Bank Limited 67.9 73.5 72.4 71.2 1

3. Jamuna Bank 58.4 55.8 61.0 58.4 3

Limited
 Government Securities/ Total Investments (%)

Serial Bank
Number 2013 2014 2015 Average Rank

1. Eastern Bank Ltd 83.6 86.0 84.5 84.7 3

2. Trust Bank Limited 90.3 94.7 92.1 92.3 2

3. Jamuna Bank 97.6 98.8 98.0 98.1 1

Limited

Composite Capital Adequacy

Govt.
Bank CAR Debt-Equity Advances/Ass Securities/ Group Rank
ets Total
Investments

% Rank Times Rank % Rank % Rank AVG Rank

Eastern Bank 14.5 1 7.8 1 67.5 2 84.7 3 1.7 1

Ltd

Trust Bank 10.3 3 16.9 3 71.2 1 92.3 2 2.2 3

Limited

Jamuna Bank 12.1 2 10.6 2 58.4 3 98.1 1 2.0 2

Limited

Interpretation:-

On the basis of group averages of four ratios of capital adequacy as expressed in this particular,
EBL was at the top position with group average of 1.7, followed by JBL (2.00), TBL (2.2). TBL
scored the lowest position due to its poor performance in Debt-Equity, Advances to Assets and
Government Securities to Total Investments ratios.
 ASSETS QUALITY

ASSETS QUALITY: The quality of assets is an important parameter to gauge the strength of
bank. The prime motto behind measuring the assets quality is to ascertain the component of non-
performing assets as a percentage of the total assets. The ratios necessary to assess the assets
quality are

 Net NPAs to Total Assets (NNPAs/TA): This ratio discloses the efficiency of bank in
assessing the credit risk and, to an extent, recovering the debts. Net NPA to Total Asset = Net
NPA/ Total Asset
 Net NPAs to Net Advances (NNPAs/NA): It is the most standard measure of assets quality
measuring the net non-performing assets as a percentage to net advances. Net NPA to Total
Advances = Net NPA/ Total Loan
 Gross NPA to Total Advances: This ratio is used to check whether the bank's gross NPAs are
increasing quarter on quarter or year on year. If it is, indicating that the bank is adding a fresh
stock of bad loans. It would mean the bank is either not exercising enough caution when
offering loans in terms of following up with borrowers on timely repayments. Gross NPA to
Total Advances = Gross NPA/ Total Loan
 Advances Yield Ratio: Yield on advances, is another important ratio, which helps us to
measure the quality of advances. Here yield means interest income received on the advances
of the bank. Increases in advance yield ratio is an indicator of sound asset quality. Advances
Yield Ratio = Interest income on advances / Total advances

Assets Quality

Net NPAs to Net Advances (%)

Serial Bank
Number 2013 2014 2015 Average Rank

1. Eastern Bank Ltd -26.0 343.8 190.6 169.4 3

 2. Trust Bank Limited -10.6 -14.3 -17.7 -14.2 2

3. Jamuna Bank -17.2 -12.0 18.9 -3.4 1

Limited

Net NPAs to Total Assets (%)

Serial Bank
Number 2013 2014 2015 Average Rank

1. Eastern Bank Ltd 2.3 2.9 2.2 2.5 2

2. Trust Bank Limited 2.1 1.7 1.9 1.9 1

3. Jamuna Bank 4.4 3.1 4.0 3.8 3

Limited

Percentage Change in Net NPAs (%)

Serial Bank
Number 2013 2014 2015 Average Rank

1. Eastern Bank Ltd 20.4 39.5 -17.3 14.2 3

2. Trust Bank Limited -1.3 5.8 37.2 13.8 2

3. Jamuna Bank -3.8 -13.8 32 4.8 1

Limited
Composite Asset Quality Adequacy

Bank Net NPAs to Net NPAs to Percentage Group Rank

Net Total Assets Change in Net
Advances Ratio NPAs

% Rank Times Rank % Rank AVG Rank

%
Eastern Bank 169.4 3 2.5 2 14.2 3 2.6 3
Ltd

Trust Bank -14.2 2 1.9 1 13.8 2 1.6 1.5

Limited

Jamuna Bank -3.4 1 3.8 3 4.8 1 1.6 1.5

Limited

Interpretation:

On the basis of group averages of three ratios of assets quality as expressed in this particular,
TBL and JBL was at the first position with group average of 1.6, followed by EBL with ranking
of (2.6). EBL scored the lowest position with 3 rank due to its poor performance in net NPAs to
net advances, net NPAs to total assets ratios.

Management Efficiency
Management Efficiency: Management efficiency is another important element of the CAMEL
Model. The ratio in this segment involves subjective analysis to measure the efficiency and
effectiveness of management. The ratios used to evaluate management efficiency are described
as

 Total Advance to Total Deposits: This ratio measures the efficiency and ability of the banks
management in converting the deposits available with the banks (excluding other funds like
equity capital, etc.) into high earning advances. Total deposits include demand deposits,
saving deposits, term deposit and deposit of other bank. Total advances also include the
receivables. Total Advance to Total Deposits=Total Advance/ Total Deposit
 Profit per Employee: This ratio shows the surplus earned per employee. It is arrived at by
dividing profit after tax earned by the bank by the total number of employee. The higher the
ratio shows better management efficiency. Profit per Employee =Profit after Tax/ No. of
Employees

 Return On equity: The return on equity ratio or ROE is a profitability ratio that measures the
ability of a firm to generate profits from its shareholders investments in the company. In
other words, the return on equity ratio shows how much profit each dollar of common
stockholders' equity generates.ROE= Net Income/Total shareholders’ equity

Management Efficiency

Total Advances to Total Deposits Ratio (%)

Serial Bank
Number 2013 2014 2015 Average Rank
1. Eastern Bank Ltd 87.9 101.3 101.7 96.9 1

2. Trust Bank Limited 77.3 85.4 86.5 83.0 2

3. Jamuna Bank Limited 69.4 67.9 73.9 70.4 3

Profit per employee (In lakh)

Serial Bank
Number 2013 2014 2015 Average Rank
1. Eastern Bank Ltd 7.94 7.20 7.62 7.59 1

2. Trust Bank Limited 2.14 7.76 8.30 6.06 3

3. Jamuna Bank Limited 5.30 6.11 7.12 6.17 2

 Return on Equity (%)
Serial Bank
Number 2013 2014 2015 Average Rank
1. Eastern Bank Ltd 13.9 10.4 10.8 11.7 3

2. Trust Bank Limited 4.7 15.9 16.1 12.2 1

3. Jamuna Bank Limited 12.7 12.4 10.4 11.8 2

Composite Management Efficiency:

Bank Total Advances Profit per Return on Group Rank

to Total Employee Equity
Deposits Ratio

% Rank Times Rank % Rank AVG Rank

Eastern Bank 96.9 1 7.59 1 11.7 3 1.6 1

Ltd

Trust Bank 83.0 2 6.06 3 11.2 1 2 2

Limited

Jamuna Bank 70.4 3 6.17 2 11.8 2 2.3 3

Limited

Interpretation:

On the basis of group averages of three ratios in this particular Table SBT was at the first
position with group average of 1, followed by TBL (2) and JBL (3) respectively. JBL scored the
lowest position with 3 rank due to its poor performance in total advances to total deposits, profit
per employee
 Earning Quality
Earning Quality The quality of earnings is a very important criterion that determines the ability
of a bank to earn consistently. It basically determines the profitability of bank and explains its
sustainability and growth in earnings in future. The following ratios explain the quality of
income generation.

 Operating Profit to Total Assets: This ratio reflects how much a bank can earn profit from its
operations for every taka invested in its total asset. In this ratio operating profit are expressed
as percentage of total assets

 Net Profit to Total Assets: This ratio reflects the return on assets employed or the efficiency
in utilization of assets. It is calculated by dividing the net profits with total assets of the bank.
Higher the ratio reflects better earning potential of a bank in the future.

 Interest Income to Total Income: Interest income is considered as prime source of revenue
for banks. The interest income to total income reflects the capability of the bank in
generating income from its lending business.

 Spread or Net Interest Margin (NIM) to Total Assets NIM is the difference between the
interest income and the interest expended. It is expressed as a percentage of total assets. A
higher spread indicates the better earnings given the total assets

Earning Quality

Operating Profit to Total Assets (%)

Serial Bank
Number 2013 2014 2015 Average Rank
1. Eastern Bank Ltd 3.0 2.3 1.8 2.3 1

2. Trust Bank Limited 0.8 1.8 1.7 1.4 3

3. Jamuna Bank Limited 1.9 1.3 1.5 1.5 2

 Net Profit to Total Assets (%)
Serial Bank
Number 2013 2014 2015 Average Rank
1. Eastern Bank Ltd 1.62 1.22 1.17 1.33 1

2. Trust Bank Limited 0.27 0.87 0.84 0.66 3

3. Jamuna Bank Limited 0.98 0.96 1.14 1.02 2

Interest Income to Total Income (%)

Serial Bank
Number 2013 2014 2015 Average Rank
1. Eastern Bank Ltd 156.3 129.8 132.2 139.4 1

2. Trust Bank Limited 264.7 208.1 184.5 219.1 2

3. Jamuna Bank Limited 172.1 168.6 140.5 160.4 3

Net Interest Margin (NIM) to Total Assets (%)

Serial Bank
Number 2013 2014 2015 Average Rank
1. Eastern Bank Ltd 4.7 3.4 2.7 3.6 1

2. Trust Bank Limited 1.4 2.5 2.9 2.2 2

3. Jamuna Bank Limited 1.4 1.8 1.8 1.6 3

Composite Earning Quality

Net Interest
Bank Operating Net Profit to Interest Income Margin Group Rank
Profit to Total to Total Income (NIM) to
Total Assets Assets Total Assets

% Rank Times Rank % Rank % Rank AVG Rank

Eastern Bank 2.3 1 1.33 1 139.4 1 3.6 1 1 1

Ltd

Trust Bank 1.4 3 0.66 3 219.1 2 2.2 2 2.5 1.5

Limited

Jamuna Bank 1.5 2 1.02 2 160.4 3 1.6 3 2.5 1.5

Limited

Interpretation:

On the basis of group averages of four ratios of quality of earning as expressed in this particular
Table.EBL was at the top position with group average of 1, followed by TBL and JBL with an
average of (2.5) respectively. TBL and JBL scored the lowest position with 1.5 ranks compare to
EBL due to its poor performance in Operating Profit to Total Assets, Net Profit to Total Assets
and Net Interest Margin (NIM) to Total Assets ratios.

Liquidity:
Liquidity: Risk of liquidity is curse to the image of bank. Bank has to take a proper care to
hedge the liquidity risk; at the same time ensuring good percentage of funds are invested in high
return generating securities, so that it is in a position to generate profit with provision liquidity to
the depositors. The following ratios are used to measure the liquidity:

 Liquid Assets to Total Assets This ratio measures the overall liquidity position of the bank.
The liquid assets include cash in hand, money at call and short notice, balance with Reserve
bank of Bangladesh and balance with banks (Bangladesh and Abroad). The total assets
include the revaluation of all the assets.
 Liquid Assets to Total Deposits This ratio measures the liquidity available to the depositors
of a bank. It is calculated by dividing the liquid assets with total deposits

Liquidity

Liquid Assets to Total Assets (%)

Serial Bank
Number 2013 2014 2015 Average Rank
1. Eastern Bank Ltd 11.7 10.3 12.9 11.6 1

2. Trust Bank Limited 11.4 8.8 10.4 10.2 2

3. Jamuna Bank Limited 11.5 7.1 8.9 9.1 3

Liquid Assets to Total Deposits (%)

Serial Bank
Number 2013 2014 2015 Average Rank
1. Eastern Bank Ltd 15.8 15.1 19.2 16.7 1

2. Trust Bank Limited 13.0 10.4 12.6 12 2

3. Jamuna Bank Limited 13.6 8.7 10.8 11 3

Composite Liquidity

Bank Liquid Assets to Total Liquid Assets to Total Group Rank

Assets (%) Deposits (%)

% Rank % Rank AVG Rank

Eastern Bank Ltd 11.6 1 16.7 1 1 1

Trust Bank Limited 10.2 2 12 2 2 2

Jamuna Bank Limited 9.1 3 11 3 3 3

Interpretation:

On the basis of group averages of two ratios of liquidity as expressed in this particular table ,
EBL was at the top position with group average of 1, followed by TBL with average of (2) and
JBL (3) respectively. JBL scored the last position with 3 ranks due to its poor performance in
Liquid Assets to Total Assets, Liquid Assets to Total Deposits ratios.

Composite Ranking (overall performance)

Bank C A M E L Average Rank

Eastern Bank 1.7 2.6 1.6 1 1 1.5 1

Ltd
Trust Bank 2.2 1.6 2 2.5 2 2.0 2
Limited

Jamuna Bank 2.0 1.6 2.3 2.5 3 2.2 3

Limited
Interpretation:

In order to assess the overall performance of Bangladeshi Commercial Banks, we calculated the
composite rating and results are presented in this particular table. The Table represents 3 depicts
the group ranking of the EBL & TBL and JBL in Bangladesh for the period of 2013-2015. It is
found that under the capital adequacy ratio parameter EBL was at the top position, while TBL
got lowest rank. Under the asset quality parameter, TBL and JBL held the top rank while EBL
held the lowest rank. Under management efficiency parameter it is observed that top rank taken
by EBL and lowest rank taken by JBL. In terms of earning quality parameter the capability of
EBL got the top rank in the while TBL and JBL was at the second and lowest position. Under the
liquidity parameter EBL stood on the top position and JBL was on the lowest position

Conclusion:-
CAMEL is an international bank rating system, now days, many banks use CAMEL rating to
measure their efficiency .These ratings are disclosed only to the banks management and not to
other banks or general public. CAMEL rating is an advanced version of the older “MACRO”
rating. In the CAMEL rating, five ratios are considered to operate any financial institution-
Capital Adequacy, Assets Quality, Management Efficiency , Earning Record and Liquidity
position-and rate them 1 to 5.An overall rating of 1 is the best while a rating 5 is the worst.
CAMEL rating is used all over the world by the bank inspectors though it has some
disadvantages. In CAMEL rating, a major problem is occurred when 2 or 3 company stands in a
same row. It is then very difficult to rate them by their position. This is also happened in our
project. JAMUNA BANK and TRUST BANK stand in a same position .And we were in
difficulties which one is the best and which one is not as well as it was too hard to put them in
any rank. CAMEL rating does not consider this but if they consider this then it will be more
accurate to judge any financial institutions. Another major problem in CAMEL rating –it does
not calculate the amount which is cost for training the employees and their extra other expenses.
Another disadvantage of CAMEL rating is that, the procedure is very costly and it needs more
efficient person to calculate it.