MANAGING BANK RISKS IN NIGERIA: ANALYSIS OF PERFORMANCE OF DOMESTIC SYSTEMICALLY IMPORTANT BANKS (D-SIB) USING THE CAMELS MODEL

A. B. SOGUNRO; M. GBAJUMO-SHERIFF; G. A.  OLALUDE; R. M. LAWUYI

A. B. SOGUNRO 4Department of Actuarial Science and Insurance, Faculty of Management Sciences, University of Lagos, Akoka, Yaba, Lagos State, Nigeria
M. GBAJUMO-SHERIFF 2Department of Employment Relations and Human Resource, Faculty of Management Sciences, University of Lagos, Akoka, Yaba, Lagos State, Nigeria.
G. A. OLALUDE Department of Statistics, Federal Polytechnic Ede, Osun State, Nigeria.
R. M. LAWUYI Department of Actuarial Science and Insurance, Faculty of Management Sciences, University of Lagos, Akoka, Yaba, Lagos State, Nigeria.

Keywords: CAMELS, Systemically-Important, Distressed-banks, Financial- ratios, supervision, bank- failure

Abstract

The risk of distress and failure is inherent in the business of banking. When this risk materializes, it impairs the ability of the banks to carry out their vital intermediation function in the economy. Hence, the study aims to assess the financial health of Nigerian banks based on a purposive sampling of six selected Nigerian banks using the CAMELS model that can enable financial institutions to focus on risk and some importance ratios. Data were obtained from the published audited financial statements of the six banks between the periods 2013 to 2018. A CAMELS analysis based on the published financial statements of the six Domestic-Systemically Important Banks (D-SIBs) was carried out. The study found that there was no major change in the CAMELS composite rating performance of the six banks in the period under consideration. The performance was relatively stable moving within a narrow band. While in terms of individual bank performances, the study found that the six banks could be separated into three different groups of high, steady, and poor performers. With an average CAMELS composite rating of "3", the overall state of health of Nigerian banks for the period under review could be described as average, which does not give cause for serious concern, Therefore, constant supervisory attention especially in various component areas of the bank is required to prevent the risk of distress and failure to carry out their vital intermediation function in the economy.