Research Journal of Finance and Accounting www.iiste.org ISSN 2222-1697 (Paper) ISSN 2222-2847 (Online) Vol.8, No.20, 2017 149 COMPARATIVE ANALYSIS OF COMMERCIAL BANKS SOUNDNESS: A CAMELS STUDY OF NIGERIAN PRE AND POST CONSOLIDATION ERA LUCKY ANYIKE LUCKY and Henry WaleruAkani, Department of Banking and Finance, Rivers State University Nkpolu - Port Harcourt, Rivers State,Nigeria ABSTRACT This study examined CAMELS analysis of Nigerian quoted commercial banks from 1997– 2016 pre and post consolidation. The objective was to x-ray and compare the Nigerian banking system soundness in the pre and post consolidation using the CAMELS criteria. Time series data of the variables were sourced from financial statements of the quoted deposit money banks within the period. The study used Capital to Risk Assets Ratio (CRA) and Adjusted Capital to Risk Assets (ACRA) as Capital Adequacy (C), Non Performing Loans and Advances to Total Assets (TLA/TA) as Assets Quality (A), Operating Expenses to Total Assets (OPE/TA), Total loans and Advances to Total Deposit (TLA/TD) as Management Quality (M), Net Interest Income to Total Assets (NII/TA) as Earnings (E), Total Liquid Assets to Total Assets (L) as liquidity (TLA/TA) and Net Interest Income to Gross Domestic Product (S) (TLA/GDP) as sensitivity. Simple average and ranking was used as data analysis method. Findings revealed that the performance of the commercial banks in the post consolidation is better than the pre-consolidation. The study concludes that there is a significant difference between the pre and post consolidation of the quoted commercial banks using the CAMELS criteria. It recommends that the banking sector reforms should be strengthened deepened and the capital and management of the commercial banks should be used for effective to achieve the objective of the banking sector reforms. KEYWORDS: Capital Adequacy, Assets Quality, Management Quality, Earnings, Liquidity, Sensitivity, Consolidation I. INTRODUCTION Over the years, there is no doubt saying, Nigeria banking industry has undergone various phases of reforms both in structure, policies, rules and regulations with the objective of achieving sound banking system and financial system stability. The regulatory and the supervisory policy framework are aimed at achieving prudential and financial system stability. The banking sector consolidation and recapitalization reforms programme of 2005 has been noted in the history of the Nigerian Banking sector as the most proactive measure to ensure sound banking system and leverage the industry of the inability to withstand monetary and macroeconomic shocks within the operating environment. The reforms was designed to enable the banking system develop the require resilience as the fulcrum of financial intermediation (Lemo, 2005). CAMELS area acronyms for Capital Adequacy, Assets Quality, Management Quality, Earnings Capacity, Liquidity and Sensitivity to risks operations in the operating environment is a product of the Uniform Financial Institutions Rating System (UFIRS) adopted by the Financial Institutions Examination Council (FIEC) and was first used in United State in 1979 (Nimalathasan, 2008). It is a ratio-based model to evaluate the performance of banks and rank the banks according to the rating criteria. The regulatory authorities’ argued that bank supervisor uses the CAMELS to access and evaluate the performance and financial soundness of the banking activities and provide a measurement of a bank current, overall financial, managerial, operational and compliance performance (Sanni, 2009). In light of the Nigerian Banking sector crisis in the last forty years, CAMELS is a useful tool to examine the safety and soundness of banks and help mitigate the potential risks which may lead to bank failures (Ajaro and Emmanuel, 2013). The consolidation reforms Nigeria in 2005 mandated Commercial banks to adhered strictly to the norms of capital adequacy, assets quality, provision for non- performing loans, prudential management and corporate governance, disclosure requirements, acceleration of pace and reach of latest technology, effective risk management mechanism, streamlining the procedures and complying with accounting standards by making financial transparent (Kolade, 2012). The uncertainties that characterize the bank operating environment, the frequent banking sector crisis and its effect on the financial market as well as the ideas of low CAMELS rating model relates to other similar model like stress test is relevant in the modern banking environment (Gunsel,2007),CAMELS rating ranges from 1 – 5.CAMELS’ model reflect excellently the conditions and performance of banks over years as well as enriches