CREDIT RISK AND COMMERCIAL BANK PROFITABILITY IN RWANDA.

Abstract Internal determinants of bank profitability can be defined as those factors that are influenced by the bank’s management decisions and policy objectives. This paper is aimed to examine the internal factors that impact on commercial banks profitability in Indonesia. The factors reviewed in the model namely capital adequacy, credit risk (non-performing loan), liquidity (loans to deposit ratio), net interest margin and operating efficiency (operating expenses to operating income ratio). Using purposive sampling method, the analysis used thirty three commercial banks, with 168 observations for the period 2010 to 2015. Based on the Chow-test, the common effect model was preferred. The model is estimated using Ordinary Least Squares method. The results revealed that two hypotheses were not be accepted. There are no significant effects of capital adequacy and credit risk on profitability, but the model explains that there are significant effects of all explanatory variables toward commercial bank profitability. However, other important internal determinants of bank profitability still have not included in the model of this paper.

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A Statistical Estimation of Commercial Bank Profitability

SSRN Electronic Journal ◽

10.2139/ssrn.2158405 ◽

2012 ◽

Author(s):

John A. Haslem

Keyword(s):

Commercial Bank ◽

Statistical Estimation ◽

Bank Profitability

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Determinants of commercial bank loan and advance disbursement: the case of private Ethiopian commercial banks

International Journal of Bank Marketing ◽

10.1108/ijbm-05-2021-0166 ◽

2021 ◽

Vol ahead-of-print (ahead-of-print) ◽

Author(s):

Tekeste Birhanu ◽

Sewunet Bosho Deressa ◽

Hossein Azadi ◽

Ants-Hannes Viira ◽

Steven Van Passel ◽

...

Keyword(s):

Credit Risk ◽

Commercial Bank ◽

Commercial Banks ◽

Inflation Rate ◽

Bank Loans ◽

Bank Loan ◽

Portfolio Investment ◽

Negative Effects ◽

Content Type ◽

Lending Rate

PurposeThis paper aimed to investigate the determinants of loans and advances from commercial banks in the case of Ethiopian private commercial banks.Design/methodology/approachThe study randomly selected seven commercial banks to represent the population stratified on their asset, deposit and paid-up capital amounts. The study utilized an unbalanced panel data model as each bank started operation at a different period of time and considered the period 1995–2016 for secondary details.FindingsThe findings showed that the deposit size, credit risk, portfolio investment, average lending rate, real gross domestic product (GDP) and inflation rate had significant and optimistic effects on the lending and advancement of private commercial banks. On the contrary, liquidity ratio had significant and negative effects on private commercial bank loans and advances. Finally, the study forwarded a feasible recommendation for concerned organs to focus on deposit size, credit risk, portfolio investment, average lending rate, real GDP, inflation rate and liquidity ratio. The results of this study will help banking industry policymakers and planners understand how to minimize inflation and unemployment by improving development and sustainable economic growth.Originality/valueThe findings of this study can also affect the general attitudes of a society by increasing knowledge and improve the quality of life for the general public.

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ANALISIS LIQUIDITY CREATION PADA PERBANKAN DI INDONESIA TAHUN 2007-2013 (STUDI KASUS PADA 10 BANK BESAR DI INDONESIA TAHUN 2013)

JURNAL STUDI MANAJEMEN ORGANISASI ◽

10.14710/jsmo.v12i1.13424 ◽

2016 ◽

Vol 12 (1) ◽

pp. 76

Author(s):

Muhammad Mirajudin ◽

Prasetiono Prasetiono

Keyword(s):

Credit Risk ◽

Commercial Bank ◽

Banking Industry ◽

Third Party ◽

Bank Credit ◽

Bank Capital ◽

Banking Supervision ◽

Earnings Volatility ◽

Negative Effect ◽

Income Instability

Problems related to banking in Indonesia today is the problem of liquidity. It is shownfrom a commercial bank credit grew 23.03% but not matched by growth in depositswhich only reached 16.56% in 2012 (Report of Banking Supervision, 2012). Therefore,this study aims to determine the liquidity creation in Indonesia as well as to analyze theinfluence of bank capital, credit risk and income instability towards liquidity creation.The samples includes 10 major banks in Indonesia with total assets of more thanRp120billion in 2013. The reason for choosing this sample because of the 10 largestbanks reflects the state of the banks in Indonesia which accounted for 65.2% of totalassets, 65.6% of total loans, and 66% of total deposits or deposits in the banking industry(PEFINDO, 2014). The results of this research note that the bank's capital and earningsvolatility is significant negative effect on liquidity creation. While the credit risk of anegative but insignificant effect on liquidity creation. In the determination coefficient testshowed that 43.6% dependent variable is the liquidity creation can be explained by theindependent variable is the capital of banks, credit risk and earnings volatility. While56.4% is explained by other variables outside the model of this study.Keywords: liquidity creation, capital of banks, credit risk, third-party funds, banks inIndonesia.

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The Determinants of Commercial Bank Profitability in Indonesia

SSRN Electronic Journal ◽

10.2139/ssrn.2456092 ◽

2014 ◽

Author(s):

Arief Putranto ◽

Aldrin Herwany ◽

Erman Sumirat

Keyword(s):

Commercial Bank ◽

Bank Profitability

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The Effect of Credit Risk and Capital Adequacy on the Profitability of Rural Banks in the Philippines

Scientific Annals of Economics and Business ◽

10.1515/saeb-2017-0006 ◽

2017 ◽

Vol 64 (1) ◽

pp. 83-96 ◽

Cited By ~ 2

Author(s):

Rufo Mendoza ◽

John Paolo R. Rivera

Keyword(s):

Risk Management ◽

Credit Risk ◽

Internal Control ◽

Management Practices ◽

The Philippines ◽

Capital Adequacy ◽

Control Measures ◽

Credit Risk Management ◽

Bank Profitability ◽

Regulatory Bodies

Abstract This paper examines the credit risk and capital adequacy of the 567 rural banks in the Philippines to investigate how both variables affect bank profitability. Using the Arellano-Bond estimator, we found out that credit risk has a negative and statistically significant relationship with profitability. However, empirical analysis showed that capital adequacy has no significant impact on the profitability of rural banks in the Philippines. It is therefore necessary for the rural banks to examine more deeply if capital infusion would result in higher profitability than increasing debts. The study also implies that it is imperative for the banks to understand which risk factors have greater impact on their financial performance and use better risk-adjusted performance measurement to support their strategies. Rural banks should establish credit risk management that defines the process from initiation to approval of loans, taking into consideration the sound credit risk management practices issued by regulatory bodies. Moreover, rural banks need to enhance internal control measures to ensure the strict implementation of internal processes on lending operations.

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