Analyzing the Financial Soundness of Kuwaiti Banks Using CAMELS Framework

AlAli, Musaed S.; Alyatama, Sundus

doi:10.18488/journal.89.2019.51.55.69

Cited by 4 publications

(1 citation statement)

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“…The first stream of studies focuses on measuring the financial soundness of banks using different models (e.g. Masud and Haq, 2016; Rahman, 2017; Dash, 2017; Mittal and Mittal, 2017; AlAli and Al-Yatama, 2019; Ouma and Kirori, 2019; Suresh et al , 2019). The second stream of studies investigates changes in the financial soundness of banks overtime (e.g.…”

Section: Literature Reviewmentioning

confidence: 99%

An assessment of the financial soundness of the Kazakh banks

Salina

Zhang

Hassan

2020

AJAR

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PurposeThe contribution of the banking industry to the financial crisis of 2007/8 has raised public concerns about the financial soundness of banks around the world with many countries still suffering the backlogs of this crisis. The continuous emergence of such crises at both national and international levels increases governments', bank regulators' and financial market participants' need for reliable tools to assess the financial soundness of banks. In this context, this study investigates the financial soundness of the Kazakh banking sector, which is ranked by the World Bank as the first in the world in terms of the percentage of nonperforming loans (NPL) to total gross loans in 2012.Design/methodology/approachUsing data about all Kazakh banks over the period January 01, 2008 to January 01, 2014, the study identifies a number of accounting indicators that influence the financial soundness of banks using principal component analysis (PCA). Then, it uses the outcomes of the PCA in a cluster analysis and groups the Kazakh banks into sound, risky and unsound banks at two points in time: January 01, 2008 and January 01, 2014. This methodology was further tested against a ranking system of banks and proved to be more reliable in detecting risky banks.FindingsFifteen financial ratios were initially selected as accounting indicators for the assessment of bank financial soundness. Using PCA, twelve indicators were isolated, which explain five principal components of capital adequacy, return on assets, profitability, asset quality, liquidity and leverage. Then using the “k-means” method, the results suggest a structure of the Kazakh banking sector on January 01, 2008 that includes two groups of banks: sound and risky banks. On January 01, 2014, this structure of the banking system has changed to include three groups of banks: sound, risky and unsound banks. Thus, in 2014 a new group of banks has emerged, i.e. financially unsound banks.Practical implicationsThe proposed cluster-based methodology has proven to be a reliable tool to detect the financial soundness of Kazakh banks, which makes us advocate its employability for bank monitoring and supervision purposes.Originality/valueThis study is the first to employ a cluster-based methodology to assess the financial soundness of a banking sector. This methodology can be used at a micro-level to determine the structure of a banking sector. Also, it can be used to monitor any changes in the structure of a banking sector and provide early warning signals about the financial health of banks.

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Section: Literature Reviewmentioning

confidence: 99%

An assessment of the financial soundness of the Kazakh banks

Salina

Zhang

Hassan

2020

AJAR

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Government Ownership Effect on Staffing Level and Financial Performance

AlAli

Saeed²

2020

IJFBS

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It has always been believed that government ownership would lead to bad financial performance and overstaffing in any organization. This study aims to examine the effect of government ownership on staffing level and the financial performance of Kuwaiti bank over the period 2010-2018. Using the financial data of ten banks listed at Kuwait stock exchange (KSE), results shows that there was s statistically significant direct relation between government ownership and overstaffing and statistically significant inverse relation between government ownership and the financial performance of banks measured by return on assets (ROA). On the other hand results show that there was no relation between overstaffing and the financial performance of Kuwaiti banks.

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Diagnostics of crisis state and threat of enterprise bankruptcy

Vasyliev,

Budnyk

2023

EH SHEI USUCT

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The article discusses methods for diagnosing the crisis state and bankruptcy threat of an enterprise. The relevance of this issue lies in the possibility of adapting to critical situations such as internal errors, economic crises, pandemics, martial law, and others. Every enterprise faces problems throughout its existence, and information about these problems is crucial to maintaining stability. Since the 1960s, many diagnostic methods have appeared and continue to develop. From the coefficients created by Beaver or Springate, the theory has evolved into sophisticated ranking methods that are still used today. The research aims to identify the pros and cons of diagnostic methods and their components, which should help analysts choose the appropriate tools for specific situations and enterprises. It is proposed to use the diagnostic process as a way to check the enterprise's performance and find the source of the crisis state if it is deteriorating or likely to deteriorate. It is important to adhere to the principle of cyclical repetition of diagnosis, which is determined by the nature of the crisis. Regular analysis eliminates the possibility of identifying a crisis in an uncontrolled state, and also provides space for optimizing processes, which helps reduce the level of errors in the diagnostic process itself. To speed up the process and make it clear, a diagnostic planning template is provided. The final results of the diagnostics will be qualitatively new management solutions based on raw and processed data aimed at solving the problem. The value of such an approach is in the constant control of the situation, which creates time and space for reaction and planning. Indirectly, for large and public companies, the use of the proposed analysis option can attract the attention of more investors, especially if analytical reports are published together with management reporting or as part of it.

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Analyzing the Financial Soundness of Kuwaiti Banks Using CAMELS Framework

Cited by 4 publications

References 0 publications

An assessment of the financial soundness of the Kazakh banks

An assessment of the financial soundness of the Kazakh banks

Government Ownership Effect on Staffing Level and Financial Performance

Diagnostics of crisis state and threat of enterprise bankruptcy

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