Determining Bank performance using CAMEL rating: A comparative study on selected Islamic and Conventional Banks in Bangladesh

Authors

  • Md. Rafiqul Islam Rafiq International Islamic University Chittagong

DOI:

https://doi.org/10.18034/abr.v6i3.40

Keywords:

Bank Performance, Islamic Bank, Conventional Bank, CAMEL

Abstract

The present article seeks to examine the determinants of the bank profitability in a developing country like Bangladesh and to compare the performance of Islamic and conventional banks during the period 2008 - 2014. Specifically working within the Bangladeshi financial sector, the analysis is confined to the domestic commercial banks operating in the Bangladeshi financial sector during the period 2008-2014. In order to achieve the study objectives and to answer some questions, the ratio analysis and CAMEL has been used. The study found that the higher capital ratio, Tier-1, and growth in total deposits for Islamic banks than conventional banks. On the other hand, Islamic banks are not able to good perform with ROA, ROE and cost-to-income ratio while conventional banks showed satisfactory performance in utilizing funds which was proved in this analysis as high ROA, ROE and cost-to-income ratio. This study shows that management efficiency regarding operating expenses positively and significantly affects the banks’ profitability.

 

JEL Classifications: G2, G22, H12, G14

The present article seeks to examine the determinants of the bank profitability in a developing country like Bangladesh and to compare the performance of Islamic and conventional banks during the period 2008 - 2014. Specifically working within the Bangladeshi financial sector, the analysis is confined to the domestic commercial banks operating in the Bangladeshi financial sector during the period 2008-2014. In order to achieve the study objectives and to answer some questions, the ratio analysis and CAMEL has been used. The study found that the higher capital ratio, Tier-1, and growth in total deposits for Islamic banks than conventional banks. On the other hand, Islamic banks are not able to good perform with ROA, ROE and cost-to-income ratio while conventional banks showed satisfactory performance in utilizing funds which was proved in this analysis as high ROA, ROE and cost-to-income ratio. This study shows that management efficiency regarding operating expenses positively and significantly affects the banks’ profitability. 

JEL Classifications: G2, G22, H12, G14

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Author Biography

  • Md. Rafiqul Islam Rafiq, International Islamic University Chittagong

    Lecturer, Department of Economics & Banking, International Islamic University Chittagong, Chittagong-4318, BANGLADESH

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Published

2016-12-27

How to Cite

Rafiq, M. R. I. (2016). Determining Bank performance using CAMEL rating: A comparative study on selected Islamic and Conventional Banks in Bangladesh. Asian Business Review, 6(3), 151-160. https://doi.org/10.18034/abr.v6i3.40

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