Applying camels model in evaluation of bank performance: the case of msb bank

BANKING ACADEMY

ADVANCED PROGRAM

=================

GRADUATION THESIS

APPLYING CAMELS MODEL IN EVALUATION OF BANK

PERFORMANCE: THE CASE OF MSB BANK

Student: Nguyễn Trung Khánh

Student ID: 21A4010823

Class: K21CLCA

Instructor: Associate Professor Ph.D Phạm Thị Hoàng Anh

Ha Noi - 2022

BANKING ACADEMY

ADVANCED PROGRAM

=================

GRADUATION THESIS

APPLYING CAMELS MODEL IN EVALUATION OF BANK

PERFORMANCE: THE CASE OF MSB BANK

Student: Nguyễn Trung Khánh

Student ID: 21A4010823

Class: K21CLCA

Instructor: Associate Professor Ph.D Phạm Thị Hoàng Anh

Ha Noi - 2022

Graduation Thesis Banking Academy

Nguyen Trung Khanh i Student ID: 21A4010823

DECLARATION

I hereby declare that the entire content of this thesis is my own research, under the

guidance and guidance of my instructor – Mrs. Associate Professor Ph.D Phạm Thị

Hoàng Anh. The research contents and results in this thesis are truthful. The data

reported in the table is for commenting and evaluating the indicators in the topic,

which are collected and statistical by me from different sources. If any fraud is

discovered, I take full responsibility for the content of my Graduation Thesis.

Hanoi, May 2022

Student

Nguyễn Trung Khánh

Graduation Thesis Banking Academy

Nguyen Trung Khanh ii Student ID: 21A4010823

ACKNOWLEDGEMENT

A completed study would not be done without any assistance. Therefore, the

author who conducted this research gratefully gives acknowledgment to their support

and motivation during the time of doing this graduation thesis.

First of all, with the deepest and most sincere affection, allow me to express

my gratitude to all the individuals and organizations who have provided support and

assistance during the study and research process. I would like to thank the teachers

of the Advanced Program, the Faculty of Banking, and especially the Board of

Directors of Banking Academy for creating conditions for me to acquire basic

knowledge during my study and creating opportunities to study, accumulate

knowledge and valuable experiences.

I would like to sincerely thank Mrs. Pham Thi Hoang Anh - who directly

helped, cared and guided me to successfully complete this graduation thesis. With the

knowledge and skills acquired in the process of working with her, it is not only the

foundation for the process of researching and completing the thesis, but also a

precious baggage for me to apply in my later career.

Besides, it is impossible not to mention the facilitation and dedicated help of

Maritime Commercial Joint-Stock Bank - Thanh Xuan branch has made the success

of this thesis. I would like to sincerely thank the staffs in the Corporate Customer

Department for creating favorable conditions for me to research, approach reality,

and teach the main operations of an RM. In particular, I would like to express my

deep gratitude to Mr. Nguyen Minh Hai - Director of Maritime Commercial Joint

Stock Bank – Thanh Xuan branch, for assigning me a suitable internship position so

that I can learn and hone my practical experience, help me complete this thesis.

Once again, I would like to send my sincere and best regards to the teachers,

friends of the Banking Academy and the staffs of Maritime Commercial Joint Stock

Bank – Thanh Xuan branch.

Graduation Thesis Banking Academy

Nguyen Trung Khanh iii Student ID: 21A4010823

TABLE OF CONTENT

INTRODUCTION.....................................................................................................1

1. Significance of study .............................................................................................1

2. Literature review...................................................................................................2

2.1. Foreign research ...............................................................................................2

2.2. Domestic research ............................................................................................3

3. Research purpose ..................................................................................................4

4. Object and scope of study.....................................................................................4

5. Research methods..................................................................................................5

6. Structure of the study ...........................................................................................5

CHAPTER 1: THEORETICAL FRAMEWORK OF ANALYSIS OF THE

COMMERCIAL BANK’S PERFORMANCE.......................................................6

1.1. Concept and characteristics of bank performance ...........................................6

1.1.1. Definition of bank performance ................................................................6

1.1.2. Assessing methods of the banking system................................................7

1.1.3. Factors affecting the performance of the commercial bank....................12

1.2. Overview of CAMELS in evaluating bank performance...............................16

1.2.1. Capital criteria.........................................................................................16

1.2.2. Asset criteria............................................................................................18

1.2.3. Management criteria................................................................................20

1.2.4. Eanings ability criteria ............................................................................20

1.2.5. Liquidity criteria......................................................................................22

1.2.6. Sensitivity criteria ...................................................................................23

CHAPTER 2: SITUATION OF FINANCIAL PERFORMANCE OF THE

MSB COMMERCIAL BANK ...............................................................................25

2.1. Introduction of the MSB commercial bank....................................................25

2.1.1. Overview of the MSB commercial bank.................................................25

2.1.2. History and development of the MSB commercial bank........................28

2.1.3. MSB commercial bank’s strategic goals.................................................29

2.2. Applying CAMELS to evaluate MSB commercial bank’s financial stituation

during a period of 3 years from 2017 – 2021........................................................30

Graduation Thesis Banking Academy

Nguyen Trung Khanh iv Student ID: 21A4010823

2.2.1. Capital Adequacy (C)..............................................................................30

2.2.2. Asset Quality (A) ....................................................................................36

2.2.3. Management (M).....................................................................................42

2.2.4. Earnings (E) ............................................................................................46

2.2.5. Liquidity (L)............................................................................................49

2.2.6. Sensitive to Market risk (S) ....................................................................51

2.3. Overall assessment of the MSB bank’s performance through CAMELS

model.....................................................................................................................53

2.3.1. Achievements..........................................................................................53

2.3.2. Limitations ..............................................................................................55

2.3.3. Causes of limitations...............................................................................56

CHAPTER 3: SOLUTIONS AND RECOMMENDATIONS FOR

IMPROVING THE MSB COMMERCIAL BANK’S PERFORMANCE ........59

3.1. Development orientation of the MSB commercial bank ...............................59

3.2. Solution affects factors...................................................................................60

3.3. Recommendations..........................................................................................64

3.3.1. For the government .................................................................................64

3.3.2. For the state bank of Vietnam.................................................................64

CONCLUSION........................................................................................................67

Graduation Thesis Banking Academy

Nguyen Trung Khanh v Student ID: 21A4010823

LIST OF ABBREVIATIONS

Abbrevations Meanings

ATB At the beginning

ATE At the end

CAR Capital adequacy ratio

EM Equity multiplier

GDP Gross domestic product

MSB Vietnam Maritime Commercial Joint Stock Bank

NIM Net interest margin

NPLs Non-performing loans

ROA Return on assets

ROE Return on equity

Graduation Thesis Banking Academy

Nguyen Trung Khanh vi Student ID: 21A4010823

LIST OF FIGURES

Figure Page

Figure 2.1: Organizational structure of MSB bank 25

Figure 2.2: Changes in total capital of MSB bank from 2017 to 2021 30

Figure 2.3: CAR ratio of MSB bank and other joint-stock

commercial banks of Vietnam

32

Figure 2.4: The financial leverage of commercial banks in Vietnam

and MSB bank

34

Figure 2.5: Non-performing loans of MSB bank in 2017 – 2021 39

Figure 2.6: Types of customer loans by period 40

Figure 2.7: Number of employees in MSB bank 43

Figure 2.8: Average income 44

Figure 2.9: ROA of MSB and other commercial banks in Vietnam 47

Figure 2.10: ROE of MSB and other commercial banks in Vietnam 48