Measuring Credit Risk Management and its Impact on Bank Performance in Iran (original) (raw)

An Evaluation of Credit Risk Management and its Impact on the Financial Performance: Evidence from the Banking Sector of Pakistan

JINNAH BUSINESS AND ECONOMICS RESEARCH JOURNAL, 2021

The purpose of the study is to examine the impact of credit risk on the financial performance of the banking sector and make a comparison among different banks in Pakistan. The study used panel regression as an underlying mechanism to determine the link between credit risk indicators and profitability determinants. The data of 23 banks for a period of 2006-2019 have collected from the annual report of the State Bank of Pakistan (SBP). The study mainly relies on the private vs. pubic and Islamic vs. conventional banking sector, the data were analyzed by using E-views software The results found that the independent variable capital adequacy has an insignificant impact on the financial performance of the baking sector. The other indicators of credit risk like the non-performing loan ratio, loan loss provision ratio, and leverage ratio have a significant relationship with the financial performance of banks in Pakistan. The study findings aim to contribute its part positively and it will...

The Factors Affecting the Credit Risk in the Iranian Banks: The Case Study of Mellat Banks

This study aimed to identify the factors affecting credit risk of Iranian banks, with special reference to customers of Mellat bank at Gholston province of Iran. By applying "DEMATEL" technique, we could select only 186 document out of 235 for the period five years from, 2011 to 2015. For this purpose, first, Theoretical framework and background related to the issue of research was studied and all of the factors affecting credit risk were identified and the information related to factors affecting the credit risk were collected from bank records of customers who received the credit facility from Mellat Bank of Golestan province at Iran. The results of logistic regression analysis and the results of "DEMATEL" technique showed that among selected variables there is a significant relationship between credit risk of customers and liquidity ratios, Leverage ratios but, in other side there is an inverse relationship between credit risk of customers and Profitability ratios, Activity ratios and Qualitative variables.

The Effect of Credit Risk Management on Profitability: An Empirical Study of Private Banks in Syria

Oradea Journal of Business and Economics, 2018

The objective of this study is to investigate the effect of credit risk management on profitability in private banks in Syria. Two main criteria have been adopted for the management of credit risk in banks: capital adequacy ratio and non-performing loans. In order to achieve the objectives of the research and to test the hypotheses, an appropriate non-probability sample numbering 6 private banks was selected from those private banks in Syria for which financial reports and risk management reports were available sequentially from 2007 until 2011, because the researchers wanted to investigate the relationship between variables within normal conditions not in the light of instability in Syria. Credit risk was measured by the capital adequacy ratio (CAR), and non-performing loans (NPL), whereas profitability was measured by the ROE indicator by calculating the data and financial reports of sampled banks and showing them in a quantitative manner and identifying the relationship between t...

The Impact of Credit Risk Management on the Financial Performance of Banking Sector in Sudan

Academy of Accounting and Financial Studies Journal, 2021

Purpose: This study's objective is to examine credit risk management effect on financial performance of Sudanese banking sector. Design/Methodology/Approach: Every bank's financial reports for 10-year period, from 2006 to 2015 had been employed for the study. To estimate the model, panel regression method was used. For performance indicator, ROE (Return on Equity) was used. Meanwhile, for credit risk management indicators, NPL (Non-Performing Loans) and CAR (Capital Adequacy Ratio) were utilized. Findings: The results showed that the profitability of Sudanese banks is significantly influenced by credit risk management. The evidence shows that 57% of profitability in banks is affected by the change in capital adequacy ratio and non-preforming loans. The study also shows there is a positive relationship between the banks' financial performance and capital adequacy ratio, but the correlation is not significant. Furthermore, the correlation between the banks' financial performance and non-performing loans is significant, but negative. Practical Implications: The percentage of the impact of NPL (non-performing loans) and CAR (capital adequacy ratio) on the banks' financial performance is 57%; which means profitability of banks is impacted by the changes in NPL and CAR. Originality/Value: This study helps filling the aperture in the empirical evidence of how credit risk management impacts the bank's financial performance process in Sudan.

Impact of Credit Risk Management on Banks Performance: A Case Study in Pakistan Banks

European Journal of Business and Management, 2017

This study captured the impact of credit risk management on performance of commercial banks in Pakistan. A fundamental research proposal was accepted in this study, and this was facilitated by the use of secondary data which was obtained from the SBP publications on banking sector survey, official websites and KSE. The pooled regression has been adopted to determine the impact of credit risk management on two performance methods. The findings revealed the fact that credit risk management is inversely associated with bank performance. For return on asset (ROA) analysis revealed that capital adequacy ratio (CAR), Loan loss provision ratio (LLPR), liquidity ratio (LR) and Non-performing loan ratio (NPLR) variables have significant impact on return on assets (ROA). The Loan loss provision ratio (LLPR), liquidity ratio (LR) and Non-performing loan ratio (NPLR) have negative while the capital adequacy ratio (CAR), loan and advances (LAR), and SIZE have positive impact on the return on ass...

Impact of Credit Risk on Banks Profitability in Pakistan: Study of Conventional Banks

2021

Credit risk (CR) management has become a crucial factor for banks in order to stay competitive and maximize profitability. Some of the most severe financial crises that the world has faced have been due to CR's ineffective management. According to the statistics for the Banking System in Pakistan (SBP, 2018), the CR for banking is on the rise, which poses a severe threat to the banks' financial health in Pakistan. This study's main objective is to determine how the CR of the commercial banks operating in Pakistan can influence their profitability. For this purpose, the study used a secondary research method and collected data from the official websites of 22 commercial banks. In addition, a sample size of 10 banks has been selected to ensure accuracy. Based on the market capitalization, ten banks with the most excellent market capitalization among all the commercial banks were selected. Risk management factors considered were the Non-performing Loan Ratio (NLPR) and Capital Adequacy Ratio (CAR), while Return on Equity (ROE) and Return on Assets (ROA) were selected as the indicators of the banks' profitability. The study found that NLPR and CAR directly affect and assess the profitability of Pakistan's major commercial banks.

Credit Risk and Profitability of Commercial Banks in Pakistan

I, 2020

Credit risk in the credit portfolio of financial institutions has dented their profitability. This study examines the relationship between credit risk and profitability of commercial banks in Pakistan. For this purpose three performance measuresROA, ROE, and NIM are used by the study. To test the relationship and impact over the period 2006-2015 the study involved 28 commercial banks. During the period under investigation, the findings of the study reveal that credit risk, represented by loan loss provisions, has a meaningful effect on the profitability measures. The findings provide exciting insights into the influence of credit risk, besides other variables in the study, on the selected commercial banks profitability inside Pakistan, for bank managers, and foremost for policymakers. The study also has policy relevance in the form of providing policymakers sufficient evidence related to the presence of credit risk in the loan portfolio of the banking sector and the ways to overcome...

THE ANALYSIS OF CREDIT RISK EFFECT ON BANK’S PROFITABILITY AT PT. BANK CENTRAL ASIA, Tbk

2018

The purpose of this study are 1) To describe the ratio of CAR, LDR, BOPO and NPL have an effect on bank profitability either partially or simultaneously at PT. Bank Central Asia, Tbk 2) To describe the dominant factor affect bank profitability at PT. Bank Central Asia, Tbk. The type of research conducted is explanatory research (explanation) ie the researcher explains the causal relationship between the variables through hypothesis testing. Techniques used in collecting data is done through documentation. Data analysis methods to determine the effect of CAR, LDR, BOPO and NPL ratio to bank profitability either partially or simultaneously at PT. Bank Central Asia, Tbk is used multiple regression method with data panel model and as data processing tool using Eviews 7 program. Based on the results of research and discussion that has been done then can be drawn conclusion as follows: 1) Ratio of CAR, LDR, BOPO and NPL have an effect on bank profitability either partially or simultan at ...

Assessment of Credit risk Management of Saudi Banks

Academy of Accounting and Financial Studies Journal, 2019

Banks are exposed to different types of risks, which can affect their financial performance and can even lead to failure of banks. The collapse of any bank is possible to happen due to the increase in non-performing loans which is a part of credit risk. Credit risk is one of the most significant risks that banks face, in view of granting credit is the main source of income for commercial banks. The research paper pursues to assess the credit risk of Saudi banks by doing financial ratio analysis from 2013-2017. Financial ratio analysis was conducted based on secondary data of 12 Saudi banks licenced by SAMA to find out the NPL/ total loans ratio, NPL/ total assets ratio, and Basel III Capital Standards ratios. Analysis showed that Saudi banks are in a good stage of Basel III implementation and have achieved more than the minimum requirements related to Common Equity Ratio, Tier I Capital Ratio, and Capital Adequacy Ratio regarding Basel III requirements. Saudi banks are also performi...

The Effect of Credit Risk Management on Financial Performance of Commercial Banks in Ethiopia

2022

This study is aimed to identify the effect of credit risk management on profitability of commercial banks of Ethiopia over the period of 2008-2018 G.C. The study employed quantitative research approach with explanatory research design. The secondary data source was employed. The result of regression analysis was applied to investigate the effect of explanatory variables on the profitability. The findings of this study show that, capital adequacy, loan to deposit ratio and loan provision ratio have positive and statistically significant effect on profitability of selected commercial banks in Ethiopia. In opposite direction, non-performing loan, loan to total asset ratio and cost per loan have negative and statistically significant effect on profitability. The profitability measured through ROA was best explained by explanatory variables incorporated in the model. Hence, the researcher suggested that the profitability of commercial banks can be improved through improving credit risk m...