Collision of NPLs on the Financial Performance of Commercial Banks: A Case Study of Ethiopia

2019 ◽  
Vol 3 (1) ◽  
pp. 1-11
Author(s):  
Hailu Megersa Tola ◽  
D. Guna Sankar
Keyword(s):  
Credit Risk ◽  
Financial Performance ◽  
Commercial Banks ◽  
Banking Industry ◽  
Financial Institution ◽  
The Will ◽  
Survival And Growth ◽  
Potential Losses ◽  
Present Case Study

Credit risk in banking relates to the possibility that loans will not be paid or that investments will   deteriorate in quality or go in to default with resultant loss to the bank. This is the most obvious and most important risk to the banking industry in terms of potential losses. Credit risk is not confined to the risk that borrowers are unable to pay; it also includes the risk of payments being delayed, which can also cause problems for the bank. In order to protect their own interest and the wealth of bank depositors, banks need to investigate and monitor the activities of the will be and existing borrowers. Adequately managing of those risks related with credit is critical for the survival and growth of any financial institution. The present case study projects the effects of Non-Performing Assets on the Financial Performance of Commercial Banks in Ethiopia.  

scholarly journals Does competition only impact on insolvency risk? New evidence from the Chinese banking industry

2017 ◽  
Vol 13 (3) ◽  
pp. 332-354 ◽  
Author(s):  
Yong Tan ◽  
John Anchor
Keyword(s):  
Credit Risk ◽  
Commercial Banks ◽  
Banking Industry ◽  
Liquidity Risk ◽  
Empirical Literature ◽  
Content Type ◽  
Insolvency Risk ◽  
Chinese Banking Industry ◽  
The Impact ◽  
Chinese Banking

Purpose The purpose of this paper is to investigate the impact of competition on credit risk, liquidity risk, capital risk and insolvency risk in the Chinese banking industry during the period 2003-2013. Design/methodology/approach This study uses a generalized method of moments system estimator to examine the impact of competition on risk. In particular, translog specifications are used to measure the competition and insolvency risk. Findings The results show that greater competition within each bank ownership type (state-owned commercial banks, joint-stock commercial banks and city commercial banks) leads to higher credit risk, higher liquidity risk, higher capital risk, but lower insolvency risk. Originality/value This paper is the first piece of research testing the impact of competition on different types of risk in banking industry and it further contributes to the empirical literature by using a more accurate competition indicator (efficiency-adjusted Lerner index) and a more precise insolvency risk indicator (stability inefficiency).

scholarly journals Does Credit Risk Management affect the Financial Performance of Commercial Banks in Kosovo?

2018 ◽  
Vol 7 (2) ◽  
pp. 49-57
Author(s):  
Rrustem Asllanaj
Keyword(s):  
Risk Management ◽  
Credit Risk ◽  
Financial Performance ◽  
Multiple Regression ◽  
Commercial Banks ◽  
Multiple Regression Model ◽  
Capital Adequacy ◽  
Regression Equations ◽  
Credit Risk Management ◽  
The Impact

This study analyses the impact of credit risk management on financial performance of commercial banks in Kosovo, and comparing the relationship between the determinants of credit risk management and financial performance by using CAMEL indicators. Panel data of 85 observations from 2008 to 2012 of ten commercial banks was analysed using multiple regression model. Findings through multiple regression analysis are presented in forms of tables and regression equations. The study also elaborates whether capital adequacy, asset quality, management efficiency, earnings and liquidity have strong or weak relationship with financial performance of commercial banks. The study concludes that CAMEL model can be used as a system of assessment and rating of credit risk management by commercial banks in Kosovo.

scholarly journals Effect of Credit Risk on Financial Performance of Commercial Banks Kenya

2016 ◽  
Vol 07 (04) ◽  
pp. 72-83 ◽  
Author(s):  
Jane Gathigia Muriithi ◽  
Kennedy MunyuaWaweru ◽  
Willy Mwangi Muturi
Keyword(s):  
Credit Risk ◽  
Financial Performance ◽  
Commercial Banks

scholarly journals THE EFFECT OF OPERATIONAL RISK MANAGEMENT PRACTICES ON THE FINANCIAL PERFORMANCE IN COMMERCIAL BANKS IN TANZANIA

2016 ◽  
Vol 1 (1) ◽  
pp. 29
Author(s):  
Kerongo Maatwa Meshack ◽  
Rose Wairimu Mwaura
Keyword(s):  
Risk Management ◽  
Credit Risk ◽  
Financial Performance ◽  
Commercial Banks ◽  
Management Practices ◽  
Operational Risk ◽  
Operational Efficiency ◽  
Primary Data ◽  
Operational Risk Management ◽  
Insolvency Risk

Purpose: The purpose of the study was to determine the effect of operational risk management practices on the financial performance in commercial banks in TanzaniaMethodology: The research problem was studied by use of a descriptive research design. The population of the study consisted of all commercial banks in Tanzania. The study used the sample size of 34 commercial banks in Tanzania. Therefore all the commercial banks participated in equally. Questionnaires were the primary data collection tool in this study. The data gathered from the respondents shall be analyzed and presented using descriptive statistics.Results: The study found that the three independent variables in the study credit risk, Insolvency risk and Operational efficiency influenced the financial performance for the period under study. Credit risk Insolvency risk   and Operational efficiency influenced commercial banks financial performance for the period of study.Unique contribution to theory, practice and policy: This study therefore recommends that the commercial banks should handle their operations appropriately as the changes in the factors like Insolvency and Credit risk bring about an effect on the profitability of commercial banks hence affecting their financial performance

scholarly journals FINANCIAL PERFORMANCE ANALYSIS OF RURAL BANKS IN MANOKWARI: A CASE STUDY OF ARFAK INDONESIA RURAL BANK

2020 ◽  
Vol 4 (2) ◽  
pp. 212-220
Author(s):  
Rully Novie Wurarah ◽  
Mona Permatasari Mokodompit
Keyword(s):  
Financial Performance ◽  
Capital Adequacy ◽  
Average Value ◽  
The Past ◽  
Good Ability ◽  
Capital Adequacy Ratio ◽  
Net Profit ◽  
Potential Losses ◽  
Profitability Ratios

The purpose of this research is to analyse the financial performance of Arfak Indonesia Rural Bank in Manokwari Regency in the period of 2014 – 2018 using financial ratios include liquidity, solvency and profitability ratios. Liquidity ratio is measured using Loan to Deposit Ratio (LDR), solvency is measured using Capital Adequacy Ratio (CAR), and profitability ratio is measured using Net Profit Margin (NPM) and Return on Asset (ROA). The research results shows that in the past 5 years, the average value of LDR (113%) is too high which is above 80%, thus the bank does not have enough liquidity to cover any unforeseen fund requirement. Furthermore, the average value of CAR (10.67%) was between the value of 9.5% and 11%, which indicates that the bank has enough capital to cushion potential losses and protect depositor’s money. As for the average value of NPM (39.46%) and ROA (6.73%) shows that the bank has a very good ability in generating profits.  

scholarly journals Effect of Credit Risk Management on Financial Performance Of Nepalese Commercial Banks

2022 ◽  
Vol 10 (1) ◽  
pp. 19-30
Author(s):  
Dr. Guna Raj Chhetri
Keyword(s):  
Risk Management ◽  
Credit Risk ◽  
Financial Performance ◽  
Significant Relationship ◽  
Commercial Banks ◽  
Capital Adequacy ◽  
Credit Risk Management ◽  
Negative Effects ◽  
Management Quality ◽  
Capital Adequacy Ratio

The main purpose of this study is to investigate the effect of credit risk on the financial performance of commercial banks in Nepal. The panel data of seventeen commercial banks with 85 observations for the period of 2015 to 2020 have been analyzed. The regression model revealed that non – performing loan (NPLR) has negative and statistically significant impact on financial performance (ROA).Capital adequacy ratio (CAR) and bank size (BS) have negative and statistically no significant impact on financial performance (ROA). Credit to deposit (CDR) has positive but no significant relationship with the financial performance (ROA) and the study concluded that the management quality ratio (MQR) has positive and significant relationship with the financial performance (ROA) of the commercial banks in Nepal. The study recommends that, it is fundamental for Nepalese commercial banks to practice scientific credit risk management, improve their efficacy in credit analysis and loan management to secure as much as possible their assets, and minimize the high incidence of non-performing loans and their negative effects on financial performance.

Examining the Relationship Between Banking Competition and Solvency, Liquidity and Credit Risks in Pakistan

2020 ◽  
Vol 4 (1) ◽  
pp. 29-52
Author(s):  
Sheikh Muhammad Umer Farooq ◽  
Muhammad Zubair Mumtaz
Keyword(s):  
Credit Risk ◽  
Financial Institutions ◽  
Commercial Banks ◽  
Banking Industry ◽  
Liquidity Risk ◽  
Foreign Banks ◽  
Banking Competition ◽  
Credit Risks ◽  
Private Banks ◽  
The Relationship

This study empirically examines the relationship between the banking competition and the risks faced by the financial sector (i.e. solvency, liquidity, and credit risks) considering 31 banks for the period 2001 to 2018. Banks are further sub-divided into three categories i.e. state-owned banks, foreign banks, and private/commercial banks. The results reveal that Pakistan’s banking industry is relatively elastic and an increase in competition is directly associated with solvency risk, liquidity risk and credit risk of financial institutions and these findings corroborate the competition fragility theory. Besides, state-owned banks have a lesser probability to cope with solvency risk, however, foreign banks appear to face the least liquidity risk whereas private banks appear to face the least credit risk among the entire cluster.

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