Ranking commercial banks in Lebanon : application of multiple approaches

Abstract

Purpose: The thesis will try the measure the efficiency of Lebanese banks, to rank and rate them using multiple approaches and taking into considerations the effect of bank size. The main objective is to compare the efficiency score to the actual ranking to see if there is any discrepancy and to see if the performance of large banks is better than that of unlisted banks. Design/ methodology/ approach: only top ten Lebanese banks are included in this thesis due to scarcity of information. Data for the study cover the period from 2008 to 2012. For the analysis and ranking of banks ‘efficiency, two methods are used. The first one is the traditional approach based on the CAMELS framework. The second method is PROMETHEE. Furthermore, banks are divided into large and small banks into listed and unlisted banks. In order to check if there is a statistical difference between the two groups of banks, a comparison between the means of big and small banks and between listed and unlisted banks will be tested using SPSS. Findings: the main findings of this study prove that the banks scores based on traditional CAMELS approach are in conformance with those based on multi-criteria approach using PROMOTHEE methodology despite some differences in the results. Furthermore, the results confirm the hypothesis that there is a positive and significant statistical difference between listed and unlisted banks’ performance while there is no difference between big and small banks. The variables that affect the scores of listed and unlisted banks are the cost to income, the liquid assets over total assets, the loan loss reserve and the return on assets. Finally, the results show that the capital intelligence financial strength rating is not appropriate to rank Lebanese commercial banks.