Title :	Risk management and financial performance in Nepalese commercial banks
Material Type:	printed text
Authors:	Rusha Shrestha, Author
Publication Date:	2017
Size:	GRP/Thesis
Accompanying material:	99p.
Languages :	English
Descriptors:	Risk management
Class number:	332.106
Abstract:	Banking sector plays a significant role in channelling funds to industries and contributing towards economic and financial growth and stability. Risk management refers to a process of identifying loss exposures faced by an organization and selecting the most appropriate techniques for treating these particular exposures effectively (Rejda, 2003). It involves identification, measurement, monitoring and controlling risks. Risk management is the process of assessing risk, taking steps to reduce risk to an acceptable level and maintaining that level of risk (Ahmed et al., 2007). The relationship between risk management and financial performance is of great concern in today’s cut throat competition in the banking industry. The risk inherent in bank lending increases the profitability of the banks on one hand while on the other hand, it can lead to the bank failure too if not managed properly. In such circumstances, liquidity, capital adequacy ratio, inflation, non performing loan, interest rate spread, gross domestic product and debt to equity and the concept of wise lending plays a great role for analyzing the impact of risk management on the financial performance of commercial banks. This study attempts to explore the relationship of Risk management and financial performance of selected commercial banks in context of Nepal. This study is based on the secondary data for 21 commercial banks with 126 observations for the period of 2009/10 to 2014/15. The data and information are collected from various issues of Banking and Financial Statistics, Bank Supervision Report published by NRB and annual reports of the selected commercial banks. The research design adopted in this study is descriptive and causal comparative research design as this study examines the impact of, capital adequacy, inflation, non performing loan, interest rate spread, GDP and debt to equity on financial performance of Nepalese commercial banks. The result shows that average return on assets is highest for NBB (3.20 percent) and lowest for MBL (0.57 percent). The average net interest margin is highest for ADBL (6.13 percent)and lowest for NSBI (2.43 percent). The average liquidity ratio is highest for NCC (35.11 times) and lowest for RBBL (2.02 times).The average capital adequacy ratio is highest for JBL (28.75 percent) and lowest for RBBL (-6.71 percent). The inflation rate is highest in year 2012/13 (9.90 percent) and lowest in year 2014/15 (7.20 percent). The average non performing loan is highest for ADBL (22.04) and lowest for JBL (9.29). The average interest rate spread is highest for NBL (6.84 percent) and lowest for JBL (2.82 percent). The gross domestic product is highest for the year 2013/14 (5.40 percent) and lowest for the year 2014/15. The average debt to equity is highest for NSBI (14.12 times) and lowest for NBL (-6.60 times). The descriptive statistics for commercial banks shows that return on assets, net interest margin, liquidity ratio, capital adequacy ratio, inflation, non performing loan, interest rate spread, gross domestic product and debt to equity is 1.61 percent, 3.30 times, 13.98 times, 11.82 percent, 8.95 percent, 19.12, 4.35 percent, 4.32 percent and 8.80 percent respectively. The correlation matrix shows that liquidity ratio and capital adequacy ratio are positively related to return on assets, while inflation, non performing loan, interest rate spread, gross domestic product and debt to equity are negatively related to return on assets. The result states that net interest margin is found to have negative relation with liquidity ratio, capital adequacy ratio, gross domestic product and debt to equity while inflation, non performing loan and interest rate spread have positive relation with net interest margin. The regression analysis reveals that The beta coefficients are negative for liquidity ratio and capital adequacy ratio with return on assets which indicates that the increase in liquidity ratio and capital adequacy ratio leads to decrease in return on assets and vice versa. However, inflation, non performing loan, interest rate spread, gross domestic product and debt to equity have positive impact on return on assets which indicates that higher the nonperforming loan, interest rate spread, gross domestic product and debt to equity higher would be the return on assets. On the other hand, liquidity ratio, capital adequacy ratio, gross domestic product and debt to equity have negative impact on net interest margin which indicates that higher the capital adequacy ratio, gross domestic product and debt to equity lower would be the net interest margin. However, the study reveals that inflation, non performing loan and interest rate spread have positive impact on net interest margin which indicates that higher the inflation, non performing loan and interest rate spread, higher would be the net interest margin.

Risk management and financial performance in Nepalese commercial banks [printed text] / Rusha Shrestha, Author . - 2017 . -  ; GRP/Thesis + 99p.
Languages : English

Descriptors:	Risk management
Class number:	332.106
Abstract:	Banking sector plays a significant role in channelling funds to industries and contributing towards economic and financial growth and stability. Risk management refers to a process of identifying loss exposures faced by an organization and selecting the most appropriate techniques for treating these particular exposures effectively (Rejda, 2003). It involves identification, measurement, monitoring and controlling risks. Risk management is the process of assessing risk, taking steps to reduce risk to an acceptable level and maintaining that level of risk (Ahmed et al., 2007). The relationship between risk management and financial performance is of great concern in today’s cut throat competition in the banking industry. The risk inherent in bank lending increases the profitability of the banks on one hand while on the other hand, it can lead to the bank failure too if not managed properly. In such circumstances, liquidity, capital adequacy ratio, inflation, non performing loan, interest rate spread, gross domestic product and debt to equity and the concept of wise lending plays a great role for analyzing the impact of risk management on the financial performance of commercial banks. This study attempts to explore the relationship of Risk management and financial performance of selected commercial banks in context of Nepal. This study is based on the secondary data for 21 commercial banks with 126 observations for the period of 2009/10 to 2014/15. The data and information are collected from various issues of Banking and Financial Statistics, Bank Supervision Report published by NRB and annual reports of the selected commercial banks. The research design adopted in this study is descriptive and causal comparative research design as this study examines the impact of, capital adequacy, inflation, non performing loan, interest rate spread, GDP and debt to equity on financial performance of Nepalese commercial banks. The result shows that average return on assets is highest for NBB (3.20 percent) and lowest for MBL (0.57 percent). The average net interest margin is highest for ADBL (6.13 percent)and lowest for NSBI (2.43 percent). The average liquidity ratio is highest for NCC (35.11 times) and lowest for RBBL (2.02 times).The average capital adequacy ratio is highest for JBL (28.75 percent) and lowest for RBBL (-6.71 percent). The inflation rate is highest in year 2012/13 (9.90 percent) and lowest in year 2014/15 (7.20 percent). The average non performing loan is highest for ADBL (22.04) and lowest for JBL (9.29). The average interest rate spread is highest for NBL (6.84 percent) and lowest for JBL (2.82 percent). The gross domestic product is highest for the year 2013/14 (5.40 percent) and lowest for the year 2014/15. The average debt to equity is highest for NSBI (14.12 times) and lowest for NBL (-6.60 times). The descriptive statistics for commercial banks shows that return on assets, net interest margin, liquidity ratio, capital adequacy ratio, inflation, non performing loan, interest rate spread, gross domestic product and debt to equity is 1.61 percent, 3.30 times, 13.98 times, 11.82 percent, 8.95 percent, 19.12, 4.35 percent, 4.32 percent and 8.80 percent respectively. The correlation matrix shows that liquidity ratio and capital adequacy ratio are positively related to return on assets, while inflation, non performing loan, interest rate spread, gross domestic product and debt to equity are negatively related to return on assets. The result states that net interest margin is found to have negative relation with liquidity ratio, capital adequacy ratio, gross domestic product and debt to equity while inflation, non performing loan and interest rate spread have positive relation with net interest margin. The regression analysis reveals that The beta coefficients are negative for liquidity ratio and capital adequacy ratio with return on assets which indicates that the increase in liquidity ratio and capital adequacy ratio leads to decrease in return on assets and vice versa. However, inflation, non performing loan, interest rate spread, gross domestic product and debt to equity have positive impact on return on assets which indicates that higher the nonperforming loan, interest rate spread, gross domestic product and debt to equity higher would be the return on assets. On the other hand, liquidity ratio, capital adequacy ratio, gross domestic product and debt to equity have negative impact on net interest margin which indicates that higher the capital adequacy ratio, gross domestic product and debt to equity lower would be the net interest margin. However, the study reveals that inflation, non performing loan and interest rate spread have positive impact on net interest margin which indicates that higher the inflation, non performing loan and interest rate spread, higher would be the net interest margin.