Evaluation of Financial Performance of Private commercial Banks in Ethiopia

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This study aimed at evaluating and analyzing the financial performance of the banking sectors in Ethiopia with special reference to private commercial banks. In conducting the study, CAMEL approach was employed. The study considered all private commercial banks for the period 2015 to 2019. To achieve the purpose of the study, secondary data were used. Annual financial reports of the bank were used as a main source of the data. . The overall objective of this study was to find out the effect of explanatory variables such as: Capital adequacy, Asset quality, Management efficiency, Earning ability, Liquidity, Net interest margin and Bank size on profitability measurement. In other words, the study was carried out to see the effect of explanatory variables on the return asset and return on equity which is employed to evaluate and rank banks based on the composite CAMEL rate results. The study employed quantitative approach, i.e., ROA and ROE were used as dependent variables whereas CAR, AQ, MGTQ, ERNQ, LIQ, NIM and Bank SIZE were taken as independent variable. Measurable apparatus such as descriptive statistics, Correlation matrix, and regression analysis were used to estimate the execution of banks. Fixed effect regression analysis model was employed to test and determine the relative importance of each explanatory variable to explain the dependent variable. The result of composite CAMEL showed that Addis international, ENAT and Buna banks were ranked from 1st to 3rd respectively whereas, Oromia international bank took the least place. From fixed effect regression analysis i.e., Asset quality and management efficiency were found to be significantly and negatively correlated to the return on asset. On the other hand, liquidity net interest margin and bank size were found to be significantly and positively correlated with ROA, whereas, capital adequacy and earning quality were found to be statically insignificant to ROA. Similarly, capital adequacy and management efficiency ratio were found to be significantly and negatively correlated to ROE. But net interest margin, liquidity and bank size were found to be significantly and positively correlated to ROE whereas, Asset quality and earning ability ratio were found to be statistically insignificant with the banks’ performance. Based on the findings from the study, recommendations were forwarded.


A Thesis Submitted To the Department of Business Administration College of Business and Economics, Addis Ababa University in Partial Fulfillment of Requirements for the degree of Master of Business Administration Specialized in Finance


CAMEL, Financial Performance