This document analyzes the financial performance of three Pakistani banks (National Bank, Askari Bank, and Citibank) under the CAMELS framework from 2009-2011. It calculates various ratios related to capital adequacy, asset quality, management, earnings/profitability, liquidity, and market sensitivity. Overall, the analysis found that Citibank generally had better ratios indicating higher capital levels, fewer non-performing loans, higher returns on assets/equity, and stronger liquidity compared to the other two banks.

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Public Policy Analysis
Group Assignment
Financial Analysis
of Banks Under
CAMELS Framework
Submitted By:
Hamir Singh
Submitted to:
Mr. Ajmal Waheed
MPA-IV
Date
07-10-2013
Quaid-i-Azam School of Management Sciences
Quaid-i-Azam University, Islamabad.

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Table Of Contents
Contents Page #
1. Introduction…………………………………………………………..03
2. Camel Framework…………………………………………………….03
 Capital Adequacy………………………………………….....04
 Asset Quality…………………………………………………04
 Management Soundness……………………………………...05
 Earning and Profitability……………………………………..05
 Liquidity……………………………………………………...06
 Sensitivity to Market risk……………………………………..06
3. Introduction of Banks………………………………………………...07
 National Bank ………………………………………………...07
 Askari Bank …………………………………………………..07
 Citi Bank……………………………………………………...08
4. Financial Analysis under ……………………………………………..09
Camels framework
5. Interpretation of Ratios……………………………………………….11
6. Conclusion…………………………………………………………….12
7. References…………………………………………………………….13

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Introduction
In today’s scenario, the banking sector is one of the fastest growing sector and a lot of funds are
invested in Banks. Also today’s banking system is becoming more complex. In this Assignment
we are evaluating the performance of the banks. We have taken three different banks that are
National Bank of Pakistan, a public bank, another is a private bank named Askari Bank and
third is a Citibank which is a foreign bank. We have taken annual reports of three years from
2009 to 2011 of all these banks for the comparison. We are applying the CAMELS Model to
evaluate the performance of the banks. It the best model because it measures the performance of
the banks from each parameter i.e. Capital, Assets, Management, Earnings, Liquidity and
Sensitivity to market risk.
The assignment is done in four portions. First we have defined the CAMELS framework their
parameters and related ratios of those parameters. Secondly we have given a brief introduction of
the banks. Third we have calculated ratios for all the banks and interpreted them. After that we
have given weight age to each parameter of the CAMELS Model. According to their importance
and our understandings, we have allocated weight age to the each ratios of the each parameter.
From the weighted results of each ratio, we got percentage on the bases of the performance of the
bank. And Fourth, the Conclusion of the whole is given in the last.
CAMELS Framework
Supervisory framework of SBP, consistent with international norms, covers risk-monitoring
factors for evaluating the performance of banks. Specifically, CAMELS framework is in place
since end December 1997 for on-site and off-site surveillance. Bank supervisory authorities
assign each bank a score on a scale of one (best) to five (worst) for each factor. If a bank has an
average score less than two it is considered to be a high-quality institution, while banks with
scores greater than three are considered to be less-than-satisfactory establishments. The system
helps the supervisory authority identify banks that are in need of attention. This framework
involves the analyses of six groups of indicators reflecting the health of financial institutions.

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Capital Adequacy:
Capital base of financial institutions facilitates depositors in forming their risk perception about
the institutions. Also, it is the key parameter for financial managers to maintain adequate levels
of capitalization. Moreover, besides absorbing unanticipated shocks, it signals that the institution
will continue to honor its obligations. The most widely used indicator of capital adequacy is
capital to risk-weighted assets ratio (CRWA). According to Bank Supervision Regulation
Committee (The Basle Committee) of Bank for International Settlements, a minimum 8 percent
CRWA is required.
Ratios:
1. Capital to liability ratio
2. Capital ratio is equal to Equity to Total Assets
3. Capital to Risk Weighted Asset
Asset Quality:
Asset quality determines the robustness of financial institutions against loss of value in the
assets. The deteriorating value of assets, being prime source of banking problems, directly pour
into other areas, as losses are eventually written-off against capital, which ultimately jeopardizes
the earning capacity of the institution. With this backdrop, the asset quality is gauged in relation
to the level and severity of non-performing assets, adequacy of provisions, recoveries,
distribution of assets etc. Popular indicators include non-performing loans to advances, loan
default to total advances, and recoveries to loan default ratios.
Ratios:
1. Earning Asset to Total Asset Ratio
2. Ratio of Non-performing Loan to total loan
3. Provisioning to gross advances
4. Net Non-performing Loan to Net Advances
5. Gross Non-performing Loan (As percentage of GDP)
6. Loan default to Gross Advances
7. Cash recovery to Total default Ratios

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Management Soundness:
Management of financial institution is generally evaluated in terms of capital adequacy, asset
quality, earnings and profitability, liquidity and risk sensitivity ratings. In addition, performance
evaluation includes compliance with set norms, ability to plan and react to changing
circumstances, technical competence, leadership and administrative ability. In effect,
management rating is just an amalgam of performance in the above-mentioned areas.
Ratios:
1. Total expenses to Total income
2. Operating expenses to Total expenses
3. Total earnings to Total employees
4. Operating expenses to Total employees
5. Provision to Total expenditure
6. Salary allowances to Total expenditure
7. Administrative expenditure to Total expenditure
Earnings and Profitability:
Earnings and profitability, the prime source of increase in capital base, is examined with regards
to interest rate policies and adequacy of provisioning. In addition, it also helps to support present
and future operations of the institutions. The single best indicator used to gauge earning is the
Return on Assets (ROA), which is net income after taxes to total asset ratio.
Ratios:
1. Profit before or after tax to Total Assets
2. Profit before or after tax to Total equity
3. Total income to Total Asset
4. Profit before tax to Average deposits
5. Net interest income to Earning asset percentage
6. Revenue to Administration expenses
7. Profit before tax to Total income
8. Fee based income to Total income

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Liquidity:
An adequate liquidity position refers to a situation, where institution can obtain sufficient funds,
either by increasing liabilities or by converting its assets quickly at a reasonable cost. It is,
therefore, generally assessed in terms of overall assets and liability management, as mismatching
gives rise to liquidity risk. Efficient fund management refers to a situation where a spread
between rate sensitive assets (RSA) and rate sensitive liabilities (RSL) is maintained. The most
commonly used tool to evaluate interest rate exposure is the Gap between RSA and RSL, while
liquidity is gauged by liquid to total asset ratio.
Ratios:
1. Liquid assets to Total assets
2. Net advances to Total deposits
3. Yield on earning assets
Sensitivity to Market Risk:
The diversified nature of bank operations make them vulnerable to various kinds of financial
risks. Sensitivity analysis reflects institution’s exposure to interest rate risk, foreign exchange
volatility and equity price risks (these risks are summed in market risk). Risk sensitivity is
mostly evaluated in terms of management’s ability to monitor and control market risk.
Ratios:
1. RSA = Rate Sensitive Asset
Net advances + Net investment + Money at call
+ Balances with other banks
2. RSL = Rate Sensitivity Liability
Deposits + Borrowings
3. GAP = RSA - RSL
4. RSA to RSL

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National Bank of Pakistan is one of the largest commercial bank operating in Pakistan. It has
redefined its role and has moved from a public sector organization into a modern commercial
bank. The Bank's services are available to individuals, corporate entities and government. While
it continues to act as trustee of public funds and as the agent to the State Bank of Pakistan (in
places where SBP does not have presence).
It has diversified its business portfolio and is today a major lead player in the debt equity market,
corporate investment banking, retail and consumer banking, agricultural financing, treasury
services and is showing growing interest in promoting and developing the country's small and
medium enterprises and at the same time fulfilling its social responsibilities, as a corporate
citizen.
Askari Bank was incorporated in Pakistan on October 9, 1991, as a public limited company. It
commenced operation on April 1, 1992, and is principally engaged in the business of banking, as
defined in the Banking Companies Ordinance, 1962. The Bank is listed on Karachi, Lahore and
Islamabad Stock Exchanges.
Since inception, the bank has concentrated on growth through improving service quality,
investment in technology and people, utilizing its extensive branch network which includes
Islamic and Agricultural banking.

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Citibank is the consumer banking division of financial services multinational Citigroup.
Citibank was founded in 1812 as the City Bank of New York, later First National City Bank of
New York. As of March 2010, Citigroup is the third largest bank holding company in the United
States by total assets, after Bank of America and JPMorgan Chase.
Citi, the leading global bank, has approximately 200 million customer accounts and does
business in more than 160 countries and jurisdictions. Citi provides consumers, corporations,
governments and institutions with a broad range of financial products and services, including
consumer banking and credit, corporate and investment banking, securities brokerage,
transaction services, and wealth management.

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Financial Analysis Under CAMELS Framework
Capital Adequacy Ratios
Ratios NATIONAL BANK ASKARI BANK CITI BANK
%age 2009 2010 2011 2009 2010 2011 2009 2010 2011
CL Ratio 12.79 17.85 13.3 5.5 4.9 5.1 9.10 9.48 10.59
CR Ratio 14.27 15.14 11.0 5.1 4.7 4.8 8.34 8.66 9.58
CRWA - - - - - - 10.86 13.24 14.94
Assets Quality Ratios
Ratios NATIONAL BANK ASKARI BANK CITI BANK
%age 2009 2010 2011 2009 2010 2011 2009 2010 2011
Earning assets to
total assets
12.34 11.22 7.2 85.71 86.34 86.05 48.21 50.02 50.07
NPL to total
loans
14.82 18.23 16.9 8.6 9.9 10.8 5.36 4.13 1.73
Provisioning to
gross advances
- - 14.0 1.5 1.3 0.97 - - -
Net NPL to net
advances
23.12 14.75 - 8.6 9.9 10.8 5.71 3.19 1.81
Management soundness Ratios
Ratios NATIONAL BANK ASKARI BANK CITI BANK
%age 2009 2010 2011 2009 2010 2011 2009 2010 2011
Total expenses to
total income
- - 2.81 60.8 71.2 47.05 2.41 2.40 2.55
Operating
expenses to total
expenses
37.32 36.90 - 10.8 11.4 10.5 68.37 76.29 77.78
Provisioning to
total expenditure
- - - 32.4 28.9 18.3 - - -
Salaries,
allowances to
total expenditure
20.66 23.11 - 54.6 49.4 47.7 - - -
Total earnings to
total employees
- - - - - - 30.29 33.30 29.45
Operating
expenses to total
employees
- - - - - - 12.33 13.90 14.89
Admin: Exp to
total expenses
35.26 36.53 75.0 - - - - - -

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Earning and Profitability Ratios
Ratios NATIONAL BANK ASKARI BANK CITI BANK
%age 2009 2010 2011 2009 2010 2011 2009 2010 2011
ROA 2.361 2.358 20.0 5.986 6.093 7.084 12.99 75.99 53.99
ROE 31.28 28.03 19.0 8.197 6.24 10.28 14.96 8.77 5.63
Total Income to
Total Assets
4.74 4.91 12.0 4.2 3.01 5.1 1.06 1.02 1.06
Revenue to
expense ratio
- - 79.0 34.5 29.04 34.85 - - -
Net interest to
Earning asset %
- - - - - - 9.79 12.16 13.07
ROD 6.62 6.52 9.90 - - - - - -
Liquidity Ratios
Ratios NATIONAL BANK ASKARI BANK CITI BANK
%age 2009 2010 2011 2009 2010 2011 2009 2010 2011
Liquid assets to
total assets
- - 33.0 79.2 80.1 86.3 15.14 15.98 17.73
Loan to deposit 65.73 57.11 20.0 65.5 59.9 51.9 93.9 93.7 95.28
Yield 17.25 19.81 - - - - 9.5 11.7 12.5
Sensitivity Ratios
NATIONAL BANK 2009 2010 2011
RSA 144928582 146608591 850165845
RSL 46004603 20935671 52716736
GAP 98923979 125672920 797449109
RSA / RSL 3.150 1.166 16.12
ASKARI BANK 2009 2010 2011
RSA 338406917 400972173 432998817
RSL 225270163 281491777 308777979
GAP 113136754 119480396 124220838
RSA / RSL 1.502 1.424 1.402
CITI BANK 2009 2010 2011
RSA 1062638 1119953 1094101
RSL 904782 923758 920377

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GAP 972166 196195 173724
RSA / RSL 1.174 1.212 1.188
Interpretation of the above Financial Ratios:
The first component, capital adequacy ultimately determines how well Financial Institutions can
manage with shocks to their balance sheets. The higher ratio shows the higher level of capital
adequacy. Citibank has the high capital ratio and its increasing as the year passes, the two other
banks are slightly being moved to the higher capital adequacy.
The extent of the credit risk depends on the quality of assets held by an individual Financial
Institution. It shows the percentage of NPLs as gross advances made by a bank and evaluates
assets quality based on loan portfolio. A non-performing loan (NPL) is a loan on which the
borrower is not making interest payments or repaying any principal. For Citibank this ratio is a
good indicator of its low non-performing loans and efficient performance. NBP has kept more
proportion for non-performing loans and due to high ratio of NPL, it has to block its productive
assets and keep them for provision. Askari Bank has maintained a lower proportion for provision
with an increasing trend, as the number of nonperforming loans increases.
Sound management is a key to bank performance but is difficult to measure. It is difficult to
judge its soundness just by looking at financial accounts of the banks. Administrative expenses
of NBP are increasing. Total expenses of Citibank are being slightly increased and the salary
expenses of Askari bank are decreasing.
Earning capacity or profitability keeps up the sound health of a Financial Institution. Citibank
has high ROA as well as ROE as compare to NBP and Askari Bank. ROA ratio expresses the
capacity of earning profit by a bank on its total assets employed in the business while ROE is a
direct measure of returns to the shareholders.
Commercial bank's liquidity exposure can be measured by analyzing the sources and uses of
liquidity. The Citibank has high rate of loan to deposit and its increasing from 2009 to 2011
while other NBP and Askari has decreased its loan to deposit ratio.

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Foreign exchange risk, interest rate risk, equity price risk, and commodity price risk are the
indicators of sensitivity to market risk. The RSA and RSL of all three banks are increasing from
2009 to 2011.
Conclusion
1. The National Bank other than the Askari and Citibank has high capital ratio and it is
highly recommended to reduce the leverage otherwise it has to face high liquidity risks in
case of any uncertainty.
2. Banks have kept lower provisions for non-performing loans and that can also be a threat
if more loans default and banks will not be available with liquid cash to compensate the
loss.
3. Foreign banks like Citibank have lost interest in Pakistan especially after global banking
crisis that started in 2007 as the crisis forced the large international banks to consolidate
their operations, which resulted in closure of branches or operations in countries like
Pakistan where risk is high and profit is low.
4. Spread shows the major earnings of any Bank and reduction in this ratio should be
monitored effectively it is cutting down the profits for Bank. Any way can be adopted for
instance; giving attractive investment opportunities and giving out favorable loans. They
also need to keep check on the interest rates they are charging on deposits and loans.
5. Banks are not utilizing its assets in effective way. They are unable to generate maximum
return out of their assets comprising of advances and loans.
6. Liquidity is reducing over the period of 3 years and to manage cushion for uncertainties,
Banks have to arrange enough liquid for that.
7. Banks are inviting more and more deposits and they are increasing with proportion to
total assets. It shows that banks can face more liquidity risk in future. To reduce this risk,
Banks have to provide better investment opportunities and provide more loans to the
customers.

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References
 Annual Reports, Year 2009, 2010 and 2011.
 www.sbp.org.pk/reports/annual/arFY01/chap6.pdf
 http://www.nbp.com.pk/AboutUs/index.aspx
 http://www.askaribank.com.pk/corporate_info.php
 http://www.citigroup.com/citi/about/our_businesses.html
 Personal Information and Evaluation