Financial Performance Analysis of Bank Rakyat Indonesia Using CAMEL Model

The assessment of inancial performance is becoming increasingly important. The Regulation of the Central Bank of IndonesiaNo.13/24/DPNP/2011 provides the mandatory of measuring Health Level Assessment System of Commercial Banks in Indonesia. Thepurpose ofthis study is to measure inancial performances ofPT. Bank Rakyat Indonesia (Persero), Tbk (BRI) for the period 2011 to 2015,and to determine the strongest correlation among inancial ratios in the component ofCAMEL. The method used is a CAMEL model, whichis divine to Capital (C), Assets Quality (A), Management (M), Earnings (E) and Liquidity (L), and also a statistical method, namely coeficientcorrelation calculation. The aspects of one another are interrelated and inseparable. The data is collected from the Audited FinancialReports of BRI for the periods of 2011-2015. The result of the study shows that over the last ive years, the inancial performance achievedby BRI was a healthy predicate respectively. All of the financial ratio performances have complied and achieved above the standards oftheCentral Bank of Indonesia. And based on coeficient correlation calculation among inancial ratios in the CAMEL components, itreveals that between Return on Asset (ROA) and Operating Expense to Operating Income (BOPO) has a strong negative correlation. Theive-year trend shows that if the BOPO decrease followed by the increase ofROA, and vice versa.


INTRODUCTION
to a company's inancial position and results that have been achieved in relation to the company's strategy (Tuna, 2013).
The bank's inancial statement intended to provide information of the assets, liabilities, and equity to the user of this information. Bank's inancial information also provides information about the bank's business for a given period of time, as described in the bank's income statement, or pro it and loss statement (Saiya & Pandowo, 2015). Based on that, management of a company should use the inancial statement as a source of information to take actions and prevent wrong actions that can harm the company.
The inancial condition of the company can be learned from its inancial reports, such as a balance sheet, an income statement and the calculation of other inancial statements. By conducting an analysis of the balance sheet items, such as liquidity and solvency ratios, it will be known and obtained a description of the inancial positions. While the analysis of the income statement will give an overview of the pro itability or developments of the relevant business. Then the results of the analysis can be used as component considerations in the determination of company policy.
The objectives of measuring inancial performances are: 1) to determine the level of liquidity, which is the company's ability to meet its inancial obligations at the time billed; 2) to assess the solvability, which is the ability of a company to meet its inancial obligations both of short term and long term inancial liabilities; 3) to determine the level of earnings (pro itability), that indicates the company's ability to generate pro its during certain periods. Financial performance measurement is a very important factor for the company. These measurements among other things can be used to assess the success of the company (Prasetyo, 2008).
This study focuses on a bank with the status of State-Owned Enterprise (SOE), PT. Bank Rakyat Indonesia (Persero), Tbk (BRI). The bank has total stocks of 56.75% which is managed by the Government of Indonesia (GOI) and the other 43.25% owned by the public, both individuals and institutions. The bank headquarters is located in Jakarta. The bank has the widest operational network and one of the largest banks that control most of the banking market in the country.

LITERATURE REVIEW
According to Saiya and Pandowo (2015), analysis of banking soundness using CAMEL method suggests that PT. Bank Mandiri (Persero) Tbk should have to pay more attention in the ield of liquidity, where in the year 2014 the LDR scores decrease about 1% and to help raise the liquidity. In addition, the study of comparative analysis of CAMEL ratio between Bank Mandiri and Bank Negara Indonesia conducted by Tuna (2013) also supported that CAMEL ratio can assess the soundness of that two banks. Furthermore, the study of CAMEL rating method is used to choose important and effective indicators in each category and then calculated ratios are compared with an average of the banking industry (Rostami, 2015). Rostami (2015) stated that the CAMEL model can help managers to control and analyze inancial data and organizational position in an industry. In another study conducted by Kumar et. al (2012) in Indian Banking, the result shows that the private sector banks are at the top of the list with their performances in terms of soundness being the best. Public sector banks like Union Bank and SBI have taken back seat and display low economic soundness in comparison.
The previous research about inancial performance has been discussed in many sectors such as a hospital, bank, and small business. Edmister (1972) stated that inancial ratio is used to measure the performance of a small business and it can be used to predict the failure. Yulandita, C (2013) investigated the inancial performance of stateowned banks with private banks during 2012-2013. The article employs CAMEL model for evaluating capital, asset quality, management, earning and liquidity. Then, the result was processed by using simple regression to provide a robust model and data. The inding shows signi icantly different of the inancial performance between the states owned banks and the private banks.
According to Megaladevi (2015), the inancial ratio is a good evaluation method to measure the company performances. The company usually uses this method to compare their performance with other competitors. There are two methods to measure the inancial performances which are accounting and market measurement. There are many researchers who prefer to use accounting measurement (Waddock and Graves 1997;Cochran and Wood 1984), rather than market measurement (Alexander and Buchholz, 1978;Vance, S. C., 1975), and some of them adopt both methods (McGuire, J. B., Sundgren, A., Schneeweis, T., 1988).
There are few differences between accounting and market measurement method. In accounting, the company uses the historical aspects to measure their inancial performance (McGuire, Schneeweis, & Hill, 1986) and it contains a bias which leads to managerial manipulation. On the other hand, the market measurement method is straightforward, focus on performance and represent the ability of a company to generate future income (McGuire, J. B., A. Sundgren, and T. Schneeweis, 1988).
Although accounting data in inancial statements is subject to manipulation and inancial statements are backward looking, they are the only detailed information available on the company's overall activities (Sinkey, 2002). Furthermore, they are the only source of information for evaluating management's potential to generate satisfactory returns in the future (Mabwe Kumbirai, Robert Webb, 2010).
A inancial ratio is considered as one of the good evaluation methods to measure company performances (Megaladevi, 2015). This method is usually employed by companies to compare their performances against competitors. A lot of empirical studies on inancial ratio on different industries can be found and studied (Tarawneh, 2006;Halkos and Salamouris, 2004). On the banking industry, the inancial ratio analysis has been applied to evaluate, examine, and rank based on their performance (Tarawneh, 2006). A study in Oman Commercial Bank showed that the inancial performance had a relationship with asset management, size, and operational ef iciency.
Correlation analysis attempts to measure the strength of such relationship between two variables by means of a single number called a correlation coef icient (Walpole, 2011). Statistically, correlation is a relation between two variables. It can be directly proportional as well as inversely proportional. Coef icient correlation has value in the interval of -1 to 1. The nearer the value to 1 means that relation between both variables is stronger and directly proportional while the nearer the value to -1 means that relation between both variables is stronger but inversely proportional. However, if the value is near 0, it means that relation between both variables is almost nonexistent.

RESEARCH METHOD AND THE VARIABLES
The method that used in this study is CAMEL model, based on the Bank of Indonesia Regulation no.13/24/DPNP/2011, CAMEL model is divine to Capital (C), Assets Quality (A), Management (M), Earnings (E) and Liquidity (L).

Capital Adequacy Ratio (CAR)
Central Bank regulates every bank that operates in Indonesia to provide minimum 8% capital. The greater the percentage of the CAR, the healthier and stronger capital base of that bank. CAR is measured from total capital (tier 1 capital + tier 2 capital) divided by risk weight exposure. If there is an increase of risk weight exposure and acquisition or obtaining non-current assets, it will result in a decrease in productivity. This will impact as well to pro it of the bank, that a component from the capital itself. If the required capital not achieves, it will decrease the performance of credit expansion and affect bank health level (Darmawi, 2012). Also, the reason why minimum CAR is critical because this is to make sure that banks have enough cushion to absorb losses before insolvent and consequently lose depositors funds.

Non-Performing Loan (NPL)
Central Bank regulates every bank that operates in Indonesia, must have NPL 5% and below. The lower NPL percentage of a bank shows the healthier bank business activities. NPL shows the quality of managing and distribution of bank loan. The more loan distributes, the more greater pro it from loan sector. In practice amount of loan must consider the quality of the loan, it means the better the quality of loan or the more feasible will reduce the risk of possibility that the loan is not performing. In this case, the bank must be cautious in approving the loan and need to evaluate the quality of the loan. Because a big amount of loan will impact losses if the loan that been distribute is not quali ied and in lict the loan not performing (Bank Indonesia, 2011).

Operating Expense to Operating Income (BOPO)
This ratio uses to measure ef iciency level and bank performance in doing operation activity. The lower percentage of BOPO ratio, the more ef icient operation expense that been uses by the bank. Operation expense and income dominated by interest expense and revenue. Central Bank regulates BOPO ratio in the range of 94% -96%.

Return on Asset (ROA)
This ratio uses to measure overall bank management performance in gain pro it. The higher ROA of a bank, the greater pro it earned by the bank, from the perspective of assets usability. Central Bank regulates standard from range of 0,5% -1,25% (Bank Indonesia, 2011).

Loan to Deposit Ratio (LDR)
This ratio uses to ind out bank performance in payback their liabilities to customer or client, who've been put funds with loans that given from their debtor (third party). The higher LDR percentage shows that if a bank lends or distribute all funds, the more illiquid a bank, otherwise lower LDR percentage shows that the bank is liquid and have funds capacity that prepared to be distributed as a loan. LDR is an important indicator in establish minimum reserve ratio (Bank Indonesia, 2011). Central Bank regulates a range of LDR 78% -100%. Figure 1.

Asset Quality
In conducting the asset quality, the type of ratio used is the ratio of NPL. This ratio is the ratio of earning assets to total earning assets. Figure 2 shows the NPL ratio of PT. Bank Rakyat Indonesia Judging from the development of the NPL of PT. Bank Rakyat Indonesia (Persero), Tbk for ive years analyzed, it can be concluded PT. Bank Rakyat Indonesia (Persero), Tbk has been operating under the Bank Indonesia regulation, which is the NPL ratio of ≤ 5%, and therefore, in the category of healthy (Table 1).

Management Analysis
Operational Ef iciency Ratio (OER), or it is very famous with BOPO (Biaya Operasional terhadap Pendapatan Operasional) ratio is used to measure the level of ef iciency and ability of banks to carry out its operations (Kuncoro and Suhardjono, 2002).  Table  1, regarding the amount of the ratio of Operational Ef iciency Ratio ≤ 94%, it means that PT. Bank Rakyat Indonesia (Persero), Tbk's management had complied with the provisions of Bank Indonesia. It can be concluded that basically BRI managements were performed too well besides generated both pro it from main activities and aiming the other income to increase their total pro its. Still, as the state-owned banks need to adapt their management effort to maximize their operating incomes and to satisfy their shareholders and company values.

Earning Analysis
Bank pro itability ratio analysis is a tool to analyze and to measure the level of business ef iciency and pro itability achieved by the bank concerned. The pro itability ratio used in this study is Return on Assets (ROA), it is used to measure the ability of bank management in generating pro it before tax. The larger the ROA, the greater the pro it level achieved the bank, so the ability of a bank in a inancially troubled condition is getting smaller. their incomes, with a detail total asset year by year growth above 10% during the four periods respectively in rows, and by a great number in 2014 around 28% of the 2013 total assets.
The downward trend is correlated with an increasing number of non-performing loan year by year and advances to customers as well as an increase of credit impairments owing to defaults which negatively impact to the pro itability. Earning factors of PT. Bank Rakyat Indonesia (Persero), Tbk years 2011-2015 in this case by using the formula of ROA were consistency above the minimum limit that has been set by the Bank Indonesia as shown in Table 1, with a standard minimum of 0.5% -1.25%.

Liquidity Analysis
An analysis of the liquidity component of the bank's ability to meet its short-term obligations or liability that is due. Based on the provisions that have been issued by Bank Indonesia, the component of bank liquidity is measured by using Loan to Deposit Ratio (LDR), which is the ratio between the total amounts of loans to funds provided by the bank. Liquidity performance measures the ability to meet inancial obligations as they become due and it is crucial to the sustained viability of banking institutions (Dendawijaya, 2000). The slips happened due to a sudden increase of new credits, such as savings and deposits due to the effect of presidential election and fall of the oil prices. It can be concluded that BRI managed well their LDR since the ratios were lower than the standard of Bank Indonesia, shown in Table 1, which is between 78% -100%. A low ratio indicates that the bank is liquid with overcapacity funds ready for credit. Table 2. shows the summary of calculation of inancial ratios of BRI for the periods of 2011 to 2015 by using CAMEL Model. The result of the calculation then can be used to determine the predicate of the bank healthy level respectively. Table 3. shows that based on coef icient correlation calculation among inancial ratios igures in Table 2, it reveals that between Return on Asset (ROA) and Operating Expense to Operating Income (BOPO) has a strong negative correlation, or -0.8236203, which is close to -1.And this is also proven by both inancial ratios igures, that the ive-year trend, 2011-2015 shows the negative relationship, if the BOPO decrease followed by the increase of ROA, and vice versa, as shown in Table 4.  Based on management analysis, it can be concluded that basically BRI managements were performed too well. They generated pro it from both main activities and aiming the other income to increase their pro its. Still, as the state-owned banks need to maintain their performances to maximize their operating incomes and to satisfy their shareholders and company values.

Coef icient Correlation of Financial Ratios of CAMEL Components
On the ROA ratios, the growth of BRI experienced positive growth from 2011-2013. Positive growth indicates that the greater the level of pro it achieved, the better the bank and the bank's position in terms of the use of assets and vice versa negative growth. The lowest ROA incurred in 2015.In terms of liquidity, it can be concluded that BRI managed well their LDR since the ratios were lower than the average of the state-owned banks. A low ratio indicates that the bankis liquid with overcapacity funds ready for credit.
The result of the study showsthat over the last ive years, the inancial performance achieved by BRI was at a healthy predicate respectively. All of the inancial ratio performances have complied and achieved above the Bank Central standards. It is recommended that BRI should maintain and improve its inancial performances achievements in the future. And to increase the pro itability This study is focused on Bank Rakyat Indonesia (BRI), which is one of the largest governmentowned banks in Indonesia. And the study has expanded the literature about inancial performance measurement in the banking industry by using CAMEL model. Data are taken from BRI annual reports and audited banks inancial reports.
Since the focus is on one industry, it is worth to explore it on a wider scale and ind out if different industry yields the same result.
In near future, it is suggested to carry out research with many banks to get a more general result. For future research and study, it is suggested to expand literature about inancial performance with model and standards that eligible for the current condition of future study. Also, it is suggested to observe the current condition of the banking industry and overall economic trends and situation that might affect and related to the study.