Performance of Banks: A comparative Study of State Owned versus Private sector Banks in Pakistan: Using CAMEL Approach

Abstract

Economic condition of any country is somehow wholly or solely depends on soundness and accuracy of banking system therefore; its importance in current economic situation cannot be denied. Banking sector is basically works to give fuel to engine the progress of an economy. Therefore any kind of disruption or problem to banking sector would definitely show a drastic affect on the economic growth. Process of performance evaluation is necessary for the betterment of financial growth, Keeping in mind the importance of performance evaluation process current research study is based on comparative analysis of performance of two major banking sectors of Pakistan (public sector & private sector) using the CAMEL MODEL for the time period of 2006 to 2014. Performance is taken as dependent variable whereas parameters of CAMEL model are taken as independent variables. Regression model is used to find out the impact and relationship among regressor and regressand and for finding any difference in the mean of performance of these two sector banks we use two sample t-test. Result of regression model shows that all the variables have significant impact on performance except Capital Adequacy ratio. Similarly result of two sample t test shows that no statistical difference found in means of both groups in case of Capital Adequacy ratio, Management Efficiency and Earning Quality whereas Asset quality and Liquidity shows difference among means of these two groups.