Abstracto

Financial soundness of deposit money banks in Nigeria: The camels model approach.

Okey N, Precious O, Onyema JI

The objective of this paper is to analyze the performance of 10 selected deposit money banks in Nigeria using the simple random sampling technique over a period of fifteen years (2000-2015). The data were sourced from the audited annual reports from the Nigerian Stock Exchange. For this purpose, CAMELS model was used. The CAMELS model established that six of the banks namely; Banks A, B, C, D, E and G were graded as satisfactory (scale point 2) in their general performances based on the 5 point likert scale where 1 is the highest and 5 is the lowest whereas 4 banks; Banks F, H, I and J were graded as fair (scale point 3) indicating that their performances are less than satisfactory. The study went further to test the significant relationship among the variables in the CAMELS model using the Friedman rank test, the result showed that there are significant relationships in capital adequacy, asset quality, management quality, earnings, liquidity ratio and sensitivity among the banks, indicating that the banks are operating at different levels of investment. Based on the findings the following recommendations were made; bank managers should focus on ensuring that their banks are well capitalized, minimize levels of non-performing loans, maintain sound management and ensure adequate liquidity so as to sustain banks’ financial soundness and mitigate vulnerability of banks.