The Distressing Effect of Non-Performing Assets to Asset Quality for Commercial Banks in Kenya

2018 ◽  
Vol 3 (6) ◽  
pp. 71-83
Author(s):  
Fred Sporta
Keyword(s):  
Financial Distress ◽  
Commercial Banks ◽  
Secondary Data ◽  
Capital Adequacy ◽  
Risk Level ◽  
Loan Loss ◽  
Risk Levels ◽  
Distress Risk ◽  
Asset Quality

Non-performing Assets is a ratio necessary when identifying financial distress effect on asset quality of financial institutions in Kenya specifically commercial banks in Kenya. Financial distress and asset quality have often been discussed separately in details, but not as satisfactorily this is because of its role of asset quality on distress risk levels of commercial banks. The current research established the distressing effect of non-performing assets on asset quality of Kenyan commercial banks. Nonloan ratio was represented by two variables: Non-performing assets to total loans ratio and Loan loss provision ratio. Thirty-eight Kenyan commercial banks were used for analysis for an eleven year period (2005-2015). Financial statements of commercial banks from CBK was used to extract secondary data for analysis. Results indicated that there a relationship between financial performance and capital adequacy regarding financial distress risk level. A correlation and panel regression analyses were carried out mainly to determine whether there was a relationship of non-performing assets and asset quality of commercial banks in Kenya, the outcome of the study indicated a positive relationship between Non-performing assets and asset quality. This study specifically gives a mindful and sense of reference to the depositor, all banking institutions including the commercial banks and policy-makers to high standards of asset quality by ensuring proper additional guidelines and controls are put in place to guard against non-performing loans.

scholarly journals Determinants of Capital Adequacy among the Commercial Banks in Ghana

2020 ◽  
pp. 88-95
Author(s):  
Ernest Somuah Annor ◽  
Fredrick Somuah Obeng ◽  
Nelly Opoku Nti
Keyword(s):  
Commercial Banks ◽  
Fixed Effects ◽  
Banking System ◽  
Secondary Data ◽  
Least Square ◽  
Capital Adequacy ◽  
Annual Reports ◽  
Independent Variables ◽  
Strict Compliance ◽  
Asset Quality

The study examined the determinants of capital adequacy among selected commercial banks in Ghana. Eight banks were sampled for the periods 2009-2016, secondary data was gathered from the annual reports of selected banks as well as the Ghana Banking Survey authored by Price Waterhouse Coopers Ghana (PWC). A balanced panel approach was employed in investigating the determinants of capital adequacy among selected commercial banks in Ghana whilst comparing estimates of pooled OLS, random and fixed effects models and the generalized least square models to ascertain the robustness of the model. The finding suggests that all the independent variables statistically and significantly influence capital adequacy. While non-performing loans negatively relate to CAR, LFTD and ROA positively impact CAR or asset quality. It is recommended that the central bank and various banks operating in Ghana pay attention to strict compliance with the regulatory regimes to keep banks sound and fit to withstand distress and losses which may, in turn, affect the banking system and economy in entirety.

scholarly journals ANALISIS TINGKAT KESEHATAN BANK DENGAN CAMEL RATIO DAN MEKANISME CORPORATE GOVERNANCE DALAM MEMPREDIKSI FINANCIAL DISTRESS PERBANKAN INDONESIA

MUAMALATUNA ◽  
2019 ◽  
Vol 10 (2) ◽  
pp. 142
Author(s):  
Jamaluddin Jamaluddin ◽  
Anisatun Kamilah
Keyword(s):  
Corporate Governance ◽  
Financial Distress ◽  
Stock Exchange ◽  
Secondary Data ◽  
Negative Influence ◽  
Positive Influence ◽  
Capital Adequacy ◽  
Governance Mechanism ◽  
Board Director ◽  
Asset Quality

The purpose of this research is to analyze bank soundess with the camel ratio and corporate governance mechanism in forcasting financial distress for Indonesian Banking. The dependent variable  is financial distress whereas the independent variable that is used in this research is Camel ratio variable and proxy to be six financial ratio such as Current Adequacy Ratio (CAR), Non Performing Loan (NPL), Return On Equity (ROE), Loan to Deposit Ratio (LDR), Biaya Operaional Pendapatan Operasional (BOPO), Net Interrest Margin (NIM) and Corporate Governance variabel proxy by Size of Board Commissioners, Size of Board Director and Independent Commissioners.  The sample of this research is using purposive sampling method. The sample obtained as many as 174 companies bank which is devided by 2 category: 155 banking there are “no problem” and 19 banking have “problem”. Sample of this research in the secondary data who listing in Indonesian Stock Exchange during period 2011-2016. Logistic regression in statistic method used by hypothesized research. The result of this research shows that Camel ratio variabel such as capital adequacy is measured by CAR has negative influence to financial distress, asset quality is measured by NPL has positive influence to financial distress, profitability is measured by ROE has negative influence to financial distress, liquidity is measured by LDR has positive influence to financial distress, efficiency is measured by BOPO has positive influence to financial distress and operating profit is measured by NIM has negative influnce to financial distress and also corporate governance variable proxy by Size of Board Commissioners has negative influence to financial distress, Size of Board Director has negative influence to financial distress and Independent Commissioners has negative influence to financial distress of this research.Key Words: Camel ratio, good corporate goernance, financial distress and bankruptcy

scholarly journals Evaluation of the Financial Performance between Traditional Private Commercial Banks and Islamic Banks in Bangladesh

2020 ◽  
Vol 4 (2) ◽  
pp. 1-10
Author(s):  
S. M. Akber ◽  
Asha Dey
Keyword(s):  
Financial Performance ◽  
Commercial Banks ◽  
Standard Test ◽  
Capital Adequacy ◽  
Islamic Banks ◽  
Test Format ◽  
Average Ratio ◽  
Significant Difference ◽  
Asset Quality

The paper analyzes and evaluated the performance of Islamic banks and Traditional private commercial banks in Bangladesh with a duration from 2015 to 2019. The basis of the analysis used in this paper is CAMEL test.  All the relevant data has collected from the bank’s websites. To measure and compare the performance this paper has used a sample of five Islamic banks and five Traditional private commercial banks. It considered the average ratio of each year.  A standard test format (CAMEL tests) has used to analyze the performance of Islamic and Traditional private commercial banks. To justify the reliability of the data this paper has used t-tests. The outcome of this paper says that apart from the quality of the management significant difference doesn’t exist between the performance of Islamic Banks and Traditional private commercial banks in Bangladesh based on CAMEL test. Considering the quality of the management and asset quality Traditional private commercial banks perform better, but for the capital adequacy and liquidity position Islamic banks perform better in Bangladesh.

scholarly journals Determinants of capital adequacy ratio: an empirical study on Egyptian banks

2015 ◽  
Vol 13 (1) ◽  
pp. 1166-1176 ◽  
Author(s):  
Hassan M. Hafez ◽  
Osama A. El-Ansary
Keyword(s):  
Credit Risk ◽  
Commercial Banks ◽  
Capital Adequacy ◽  
Significant Variable ◽  
Loan Loss ◽  
International Financial Crises ◽  
Management Quality ◽  
Net Interest Margin ◽  
Capital Adequacy Ratio ◽  
Asset Quality

Capital adequacy rules are safety valve for regulators and banks’ clients/shareholders to reduce expected risks faced by commercial banks especially for cross border transactions as these rules are applied compulsory by all banks internationally. Applying these rules will achieve rational management and governance. This paper examines explanatory victors that influence capital adequacy ratio (CAR) in the Egyptian commercial banks. The study covers 36 banks during the period from 2003-2013. We examined the relationship between CAR as dependent variable and the following independent variables: earning assets ratio, profitability, and liquidity, Loan loss provision as measure of credit risk, net interest margin growth, size, loans assets ratio and deposits assets ratio. Furthermore, we investigate determinants of CAR before and after the 2007-2008 international financial crises. Results vary according to the period understudy. For the whole period 2003 to 2013 results show that liquidity, size and management quality are the most significant variables. Before the period 2008 results show that asset quality, size and profitability are the most significant variables. After the period 2009 results show that asset quality, size, liquidity, management quality and credit risk are the most significant variable that explain the variance of Egyptian banks’ CAR.

scholarly journals What are the factors financial distress? The National Private Commercial Banks in Indonesia Case

2019 ◽  
Vol 2 (2) ◽  
pp. 13-20
Author(s):  
Nelmida Nelmida
Keyword(s):  
Factor Analysis ◽  
Financial Distress ◽  
Commercial Banks ◽  
Stock Exchange ◽  
Secondary Data ◽  
Sampling Technique ◽  
Manufacturing Companies ◽  
Z Score ◽  
Score Model ◽  
Asset Quality

This study employs to identify the determinant factors of the potential bankruptcy of National Private Commercial Banks listed on the Indonesia Stock Exchange. The type of data is secondary data derived from the company's financial statements from 2015-2017. The population of this research is all companies of National Private Commercial Banks listed on the Indonesia Stock Exchange with the purposive sampling technique of sampling 40 companies. The analytical method used to identify the potential for bankruptcy is used the modified Altman Z Score model for non-manufacturing companies in developing capital markets. To identify the determinants of potential bankruptcy is used the Factor Analysis method. Based on the analysis, it is obtained that the potential bankruptcy of the company as a sample has a value of Z Score> 2.60 (including safe zone or healthy category). Then based on the results of analysis factors from the 10 variables studied only 9 variables that found the requirements as a determinant of potential bankruptcy, namely: CAR, NPL, ROA, NIM, BOPO, LDR, CR, ECTA, and TATG variables are divided into 2 factors, namely factor 1 which consists of variables CAR, NIM, LDR, CR, ECTA, and TATG which are named Capital variables and Liquidity, while the one that includes factor 2 consists of variables NPL, ROA, and BOPO which are given variable names Asset Quality and Earning. Keywords: Potential bankruptcy; National Private Commercial Banks; and Factor Analysis; and Altman Z Score model

Analysis of Financial Performance of Public Sector Banks in India: CAMEL

2020 ◽  
pp. 097674792096686
Author(s):  
Yudhvir Singh ◽  
Ram Milan
Keyword(s):  
Public Sector ◽  
Banking Sector ◽  
Positive Impact ◽  
Secondary Data ◽  
Capital Adequacy ◽  
Factors Affecting ◽  
Public Sector Banks ◽  
The Government ◽  
And Performance ◽  
Asset Quality

Public sector banks have been merged by the government in the last few years. This is the rationale behind conducting this study. The purpose of this article is to determine the factors affecting the performance of public sector banks in India and the interrelationship between bank-specific determinants and performance of public sector banks. In this article, we shall analyse the financial data of all the public sector commercial banks for a period spread across 11 years (2009–2019); Capital adequacy, Assets quality, Management efficiency, Earning, and Liquidity (CAMEL) has been used as a performance determinant; system generalised method of moments (GMM) analysis has been used to find the effect of determinants on the performance measurement of public sector banks; and CCA (canonical correlation analysis) has been used to find the interrelationship between the bank-specific determinants and the performance of public sector banks. The finding has important implications in terms of performance in the banking sector. Certain limitations of this study are: It is based on secondary data. The study only covers the financial aspects and not the non-financial aspects. It is found that the asset quality is negatively related with performance of public sector banks. Liquidity and inflation are inversely related to performance of public sector banks in India. Capital adequacy is positively related with banks’ performance, but inversely related with banks’ interest margin. GDP growth has a significant positive impact on banks’ performance, but inversely related with banks’ interest income. Inflation rate is inversely related with banks’ performance. Banking sector reforms are insignificantly related with banks’ performance.

scholarly journals PENGARUH RASIO CAPITAL ADEQUACY, LOAN TO DEPOSIT, NET INTEREST MARGIN TERHADAP PERTUMBUHANLABA (STUDI KASUS PADA BANK UMUM KONVENSIONALYANG TERDAFTAR DI BURSA EFEK INDONESIA)

AKUNTABILITAS ◽  
2019 ◽  
Vol 11 (2) ◽  
pp. 115-126
Author(s):  
Bambang Suryadi ◽  
Lis Djuniar
Keyword(s):  
Commercial Banks ◽  
Stock Exchange ◽  
Secondary Data ◽  
Capital Adequacy ◽  
Test Results ◽  
Net Interest Margin ◽  
Capital Adequacy Ratio ◽  
Research Population ◽  
Profit Growth ◽  
Interest Margin

This study is how Influence Ratio Capital Adequacy Ratio, Loan to Deposit Ratio, Net Interest Margin Against Profit Growth at Conventional Commercial Banks Listed on Indonesia Stock Exchange. the purpose of this study is to analyze the Influence of Capital Adequacy Ratio Ratio, Loan to Deposit Ratio, Net Interest Margin on Profit Growth at Conventional Commercial Banks Listed on Indonesia Stock Exchange. The type of research used is associative research. The research population is conventional commercial bank in Indonesia. The research variables are Capital Adequacy Ratio (CAR), Loan to Deposit Ratio (LDR), Net Interest Margin (NIM), and Profit Growth. The data used is secondary data. Data collection methods are quantitative. Partial test results show that NIM has a significant effect on Profit Growth, While CAR and LDR have no significant effect to Profit Growth.

scholarly journals ANALISIS PERBEDAAN RASIO KEUANGAN BANK UMUM KONVESIONAL DAN BANK UMUM SYARIAH SERTA PENGARUHNYA TERHADAP PENYALURAN KREDIT ATAU PEMBIAYAAN (Studi empiris yang tedrdaftar di BEI periode 2013-2016)

2017 ◽  
Vol 5 (1) ◽  
pp. 9-23
Author(s):  
Dika Ismawati ◽  
Edy Supriyono
Keyword(s):  
Commercial Bank ◽  
Commercial Banks ◽  
Secondary Data ◽  
Capital Adequacy ◽  
Financial Ratios ◽  
Operating Efficiency ◽  
Analysis Technique ◽  
Significant Difference ◽  
Negative Effect ◽  
General Data

This study aims to obtain evidence of differences in financial ratios of conventional commercial banks and sharia commercial banks, as well as the influence of financial ratios, liquidity, capital adequacy, problem loans, profitability, operating efficiency of lending. This study uses secondary data. The sample in this research is conventional commercial bank and sharia public bank listed on BEI with 4 year observation period (2013-2016). This sample was chosen by purposive sampling method. Independent sample t-test is used to test whether there is difference of average of two interconnected samples, multiple linear regression is used as data analysis technique as many as 148 general data of banking company, conventional bank and syariah commercial bank as many as 44 company data period 2013-2016 . The results of this study indicate that there are differences in average liquidity, problem loans, profitability, operating efficiency, While the average capital adequacy there is no significant difference between conventional commercial banks and sharia banks. While liquidity and profitability have a positive effect on lending, non performing loans and operating efficiency have a negative effect on lending, and capital adequacy does not affect credit disbursement.  

scholarly journals A Study on Financial Performance of the Jordanian Commercial Banks using the CAMEL Model and Panel Data Approach

2020 ◽  
Vol 9 (4) ◽  
pp. 111-130
Author(s):  
Jamil Al Zaidanin
Keyword(s):  
Commercial Banks ◽  
Negative Relationship ◽  
Capital Adequacy ◽  
Primary Data ◽  
Quality Level ◽  
Financial Reports ◽  
Interest Income ◽  
Lending Policy ◽  
Performance Determinants ◽  
Asset Quality

The purpose of this research paper is to extensively investigate and examine the effect of the CAMEL model variables on the profitability and financial soundness of the thirteen Jordanian commercial banks for the period of 2013 to 2019, the primary data were collected from the published audited financial reports of the Jordanian commercial banks. The study uses CAMEL model variables of Capital adequacy, Asset Quality, Management efficiency, Earnings ability, and Liquidity management to rank banks as per their overall performance and measuring their effect on banks’ profitability measures of Return on Assets and Return on Equity separately through applying the fixed effect regression model. It is concluded that the ranking approach shows that Bank of Jordan was in the top position followed by the Capital Bank of Jordan. Jordan Ahli Bank was in the lowest rank in most positions. Furthermore, the empirical results indicates that Non-Interest Income to Total Assets and Net Interest Income to Total Loans and Advances have significant positive relationships with both profitability measures whereas cost to Total Income and Non-Interest Income to Total Assets have strong negative relationships with the profitability measures. In addition, Equity to Total Assets has strong negative relationship with ROE. The study suggests that Jordanian commercial banks can improve their profitability through the concentration on main activities, efficiently managing their capital adequacy, maintaining high quality level of lending policy, and utilization of full assets. Additionally, the current study recommends conducting more studies on banks’ performance determinants with an expanded scope and using more financial models besides the CAMEL model.

scholarly journals Bank Regulation and Level of Non performing Loans in Commercial Banks in Nakuru County Kenya

2020 ◽  
Vol 2 (2) ◽  
pp. 59-76
Author(s):  
Geoffrey Indeje Muhanji ◽  
Joseph Theuri
Keyword(s):  
Central Bank ◽  
Commercial Banks ◽  
Bank Regulation ◽  
Capital Adequacy ◽  
Liquidity Management ◽  
Macroeconomic Factors ◽  
Nonperforming Loans ◽  
Management Efficiency ◽  
Asset Quality ◽  
The Relationship

The study sought to determine the effect of bank regulation and level of nonperforming loans in commercial banks in Nakuru County Kenya. The specific objectives of the study were to explore the effect of capital adequacy on the level of nonperforming loans in commercial banks in Nakuru County Kenya, to find out the effect of asset quality on the level of nonperforming loans in commercial banks in Nakuru County Kenya, to evaluate the effect of liquidity management on the level of nonperforming loans in commercial banks in Nakuru County Kenya, to examine the effect of management efficiency on the level of nonperforming loans in commercial banks in Nakuru County Kenya and to determine the moderating effect of macroeconomic factors on the relationship between bank regulation and level of nonperforming loans. The literature review focused on portfolio theory of investment, capital asset pricing theory and the capital buffer theory of capital adequacy. The primary data was collected using structured questionnaires and secondary data was collected from the banking survey 2017 and central bank of Kenya annual supervisory reports. The study employed multiple linear regression analysis and the finding revealed that there exist a negative and statistically insignificant relationship between capital adequacy and non-performing loans. It was also observed that there exist a negative and statistically insignificant relationship between liquidity management and non-performing loans. On the other hand, there exist a positive and statistically significant relationship between asset quality and non-performing loans. Similarly, there exist a positive and statistically insignificant relationship between management efficiency and non-performing loans. Finally, the findings indicated that macroeconomic factors have moderating effect on the relationship between bank regulations and non-performing loans in commercial banks in Nakuru County. It was concluded that asset quality positively influences non-performing loans while management efficiency influence positively the non-performing loans. Similarly, liquidity management exerts a negative influence on non-performing loans. Finally, capital adequacy influence negatively on non-performing loans. The study recommends that Central Bank of Kenya should regularly access lending behavior to ensure compliance with banking regulations to avoid increasing incidences of non-performing loans. In addition, Central Bank of Kenya should closely monitor banks with deteriorating asset quality. Further, Central Bank of Kenya should strictly monitor the economic sector and ensure that banks provide adequate provisions for loans to mitigate risks of default. Furthermore, banks should maintain a good balance on deposits and lending out loans and adhere to regulators decisions about monetary policies. Finally, banks should increase the operational efficiency of operation weakness and improve corporate governance on the sanction of loans and Central Bank of Kenya should focus on managerial performance in order to detect banks with potential increases in non-performing loans.

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