Review article
FINANCIAL PERFORMANCE OF “THE BEST AFRICAN BANKS”: A COMPARATIVE ANALYSIS THROUGH CAMEL RATING
Tesfatsion Sahlu Desta
; Department of Financial Governance, College of Accounting Sciences, University of South Africa, Pretoria, South Africa
Abstract
This study analyzed the financial performance of the African banks. Only seven banks were observed among the 30 African best banks as identified by the Global Finance Magazine. These banks have complete and consolidated financial statements for a period of the recent three fiscal years (i.e. 2012 to 2014). It has applied the CAMEL composite and component rating. The study found that the banks are rated as strong and satisfactory when rated in terms of capital adequacy ratio and earnings ability. Conversely, they were rated as less satisfactory, deficient and critically deficient when rated in terms of asset quality, management quality and liquidity. All the banks were aggregately rated as composite 3 (i.e. Fair). Standard Bank of South Africa Ltd. (South Africa) ranked last among the banks under study, but it was selected as the winner best regional bank by the Global Finance Magazine in 2015. The banks are recommended to employ the CAMEL composite and component rating on a periodic basis in order to withstand business fluctuations and vulnerability to outside influences. Similarly, institutions like the Global Finance Magazine are recommended to apply the CAMEL composite and component rating while ranking best banks. Finally, further research is worth pursuing for constructing a complete ratio’s rating scale and weight for all ratios that constitute the composite CAMEL components.
Keywords
Banking; Component; Composite; Evaluation: Ratio
Hrčak ID:
162948
URI
Publication date:
30.6.2016.
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