Analysis of factors affecting profitability of commercial banks in Ghana the camel approach

Abstract

The research aimed to analyze the factors that determine the profitability of commercial banks in Ghana using the CAMEL methodology, as well as to differentiate the effects of different types of bank ownership. A 12-year (2010-2021) panel data was collected from 9 listed commercial banks selected using purposeful sampling technique. Using a panel regression technique (pooled least square and random effect), the findings indicated that private banks outperformed their public sector counterparts in terms of capitalization, asset quality, management efficiency, and profitability, likely due to greater investment in cost-reducing strategies. It was also found that the CAMEL framework has statistically significant effect on the banks’ performance. It was concluded that to remain competitive and resilient to economic shocks, efficiency goals should be prioritized, staff should have a solid grasp of CAMEL, and there should be robust engagement between regulators and banks. It was therefore recommended that commercial banks should improve credit risk management and branch out into non-traditional areas to boost profitability and sustain expansion.