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Refine your search Apply to external sourcesCredit smoothing and determinants of loan provision: a case of Nepalese commercial banks / Rajiv Shrestha
Title : Credit smoothing and determinants of loan provision: a case of Nepalese commercial banks Material Type: printed text Authors: Rajiv Shrestha, Author Publication Date: 2016 Pagination: 100p. Size: GRP/Thesis Accompanying material: 7/B Languages : English Descriptors: Credit Class number: 332.7 Abstract: In commercial banking business, loan loss provision has a significant role to protect against the banks from failure. A loan loss provision is a charge to commercial banks’ profit and loss statements, which creates a reserve on the balance sheet of the banks. It can be viewed as a cushioning mechanism which ensures that commercial banks do not lose the entire loan balance outstanding unexpectedly. Without the adjustment for loan losses, the amount of funds lent on the balance sheet would include possible future losses (Craigwell and Elliott, 2011). Thus, the loan loss provision is a mechanism created in the banking system to get out of the financial instability resulted from high non performing loan ratio. This study focuses on the dependent variable namely loan loss provision which has been measured in terms of log of loan loss provision and loan loss provision to total loan.
This study examines the determinants of loan loss provision of Nepalese commercial banks with respect to banks specific variables and macroeconomic variables. The specific objectives of this study is to analyze the relationship and impact of non-performing loan, capital adequacy ratio, return on assets, loan to assets ratio, earnings before tax and provision, loan growth, GDP and inflation on bank’s loan loss provision. The study has selected 18 Nepalese commercial banks for the period 2008-2014. The research is based on secondary data and the data were collected from bank supervision report published by Nepal rastra bank and annual report of banks. The methods used for secondary data analysis included descriptive analysis, correlation analysis and regression analysis.
The study results show that the average loan loss provision is highest for Agricultural development bank limited and lowest for Prime bank limited. Similarly, the average loan loss provision to total loan is highest for Agricultural development bank limited and lowest for Laxmi bank limited. Non-performing loans show positive relationship with loan loss provision of Nepalese commercial banks. This explains that the firms with higher non-performing loan will have higher loan loss provision. Capital adequacy ratio show negative relationship with loan loss provision of Nepalese commercial banks. This demonstrates that the firms with higher capital adequacy ratio will have lower loan loss provision. Return on assets show positive relationship
with loan loss provision of Nepalese commercial banks. This indicates that higher the firms return on assets, higher will be the loan loss provision.
Loan growth rate shows negative relationship with loan loss provision of Nepalese commercial banks. This reveals that the firms with higher loan growth rate will have lower loan loss provision. Also, earnings before tax and provision show positive relationship with natural logarithm of loan loss provision of Nepalese commercial banks. This explains that higher the firms earning before tax and provision, higher will be the loan loss provision. Loan to assets ratio is found to be positively correlated with loan loss provision, whereas, GDP growth rate and inflation were found to be negatively correlated with loan loss provision of Nepalese commercial banks.
Credit smoothing and determinants of loan provision: a case of Nepalese commercial banks [printed text] / Rajiv Shrestha, Author . - 2016 . - 100p. ; GRP/Thesis + 7/B.
Languages : English
Descriptors: Credit Class number: 332.7 Abstract: In commercial banking business, loan loss provision has a significant role to protect against the banks from failure. A loan loss provision is a charge to commercial banks’ profit and loss statements, which creates a reserve on the balance sheet of the banks. It can be viewed as a cushioning mechanism which ensures that commercial banks do not lose the entire loan balance outstanding unexpectedly. Without the adjustment for loan losses, the amount of funds lent on the balance sheet would include possible future losses (Craigwell and Elliott, 2011). Thus, the loan loss provision is a mechanism created in the banking system to get out of the financial instability resulted from high non performing loan ratio. This study focuses on the dependent variable namely loan loss provision which has been measured in terms of log of loan loss provision and loan loss provision to total loan.
This study examines the determinants of loan loss provision of Nepalese commercial banks with respect to banks specific variables and macroeconomic variables. The specific objectives of this study is to analyze the relationship and impact of non-performing loan, capital adequacy ratio, return on assets, loan to assets ratio, earnings before tax and provision, loan growth, GDP and inflation on bank’s loan loss provision. The study has selected 18 Nepalese commercial banks for the period 2008-2014. The research is based on secondary data and the data were collected from bank supervision report published by Nepal rastra bank and annual report of banks. The methods used for secondary data analysis included descriptive analysis, correlation analysis and regression analysis.
The study results show that the average loan loss provision is highest for Agricultural development bank limited and lowest for Prime bank limited. Similarly, the average loan loss provision to total loan is highest for Agricultural development bank limited and lowest for Laxmi bank limited. Non-performing loans show positive relationship with loan loss provision of Nepalese commercial banks. This explains that the firms with higher non-performing loan will have higher loan loss provision. Capital adequacy ratio show negative relationship with loan loss provision of Nepalese commercial banks. This demonstrates that the firms with higher capital adequacy ratio will have lower loan loss provision. Return on assets show positive relationship
with loan loss provision of Nepalese commercial banks. This indicates that higher the firms return on assets, higher will be the loan loss provision.
Loan growth rate shows negative relationship with loan loss provision of Nepalese commercial banks. This reveals that the firms with higher loan growth rate will have lower loan loss provision. Also, earnings before tax and provision show positive relationship with natural logarithm of loan loss provision of Nepalese commercial banks. This explains that higher the firms earning before tax and provision, higher will be the loan loss provision. Loan to assets ratio is found to be positively correlated with loan loss provision, whereas, GDP growth rate and inflation were found to be negatively correlated with loan loss provision of Nepalese commercial banks.
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Barcode Call number Media type Location Section Status 203/D 332.7 SHR Books Uniglobe Library Social Sciences Available
Title : The determinants of credit risk in Nepalese banking industry Material Type: printed text Authors: Sher Bahadur Darai, Author Publication Date: 2017 Pagination: 98p. Size: GRP/Thesis Accompanying material: 7/B Languages : English Descriptors: Credit risk Class number: 332.7 Abstract: The credit risk in commercial banks has been on the limelight with regards to problems facing global financial institutions. A look around on the causes of global financial crisis, the Euro zone crisis and the fall of world greatest institutions such as Enron boils down to the question of how best is credit risk being managed. The magnitude of the financial crisis clearly demonstrates how critical commercial banks have been interconnected to the world economy (Angello & Sousa, 2012). A commercial bank exists not only to accept deposit but also to grant credit facilities, therefore inevitably exposed to credit risk. Credit risk is by far the most significant risk faced by banks and the success of their business depends upon accurate measurement and efficient management of this risk to a greater extent than any other risk (Giesecke, 2004)
Credit risk plays a vital role in banking business, so bankers and regulators try to make their own model to increase their loan portfolio quality. Among the several risk in bank, credit risk is primary cause of bank failure (Bhattacharya & Roy, 2008). It has found that effective Credit Risk Management (CRM) is essential for banking in order to minimize credit losses (Santomero, 1997).Credit risk management is indeed a very difficult and complex task in the financial industry because of the unpredictable mature of macroeconomic factors coupled with the various microeconomics variables which are peculiar to the banking industry or specific to a particular bank (Garr, 2013).
The major objective of the study is to examine the determinants of credit risk in context Nepalese commercial banks. The specific objective s of this study are: a) to examine the structure and pattern of risk weighted exposure, impaired loans and loan loss Provision of Nepalese commercial banks, b) to examine the structure and pattern of selected bank specific and macroeconomic factors of Nepalese commercial banks, c) To find out the relation of selected bank specific and macroeconomic factors with credit risk of Nepalese commercial banks, d) to analyze the most important factors affecting credit risk of Nepalese commercial.
This study has employed descriptive research design and causal comparative research design to deal with issues associated with factors influencing credit risk of the commercial banks in the context of Nepal. This study is based on the secondary data which are gathered for 20 commercial banks in Nepal. The main sources of the data are Annual Supervision Report and Economic Bulletin published by Nepal Rastra Bank and annual report of selected commercial banks. The data are collected on risk weighted exposure, impaired loans, loan loss provision, bank size, capital adequacy ratio, operational inefficiency, gross domestic product (GDP), money supply and inflation rate. Cross sectional data are used in this study where 20 commercial banks out of 30 in Nepal are included over the period of 2007/08 to 2013/14.
The result shows bank size, money supply and inflation rate is positively related to risk weighted exposure. It means that increase in bank size, money supply and inflation rate leads to increases in risk weighted exposure. Capital adequacy ratio is negatively related to risk weighted exposure indicating that increase in capital adequacy ratio leads to decrease in risk weighted exposure. Likewise, GDP growth rate is also negatively related to risk weighted exposure. Operational inefficiency is positively related to loan loss provision which indicates that higher the operational inefficiency higher would be the loan loss provision. There is negative correlation between bank size, capital adequacy ratio, GDP growth rate and inflation rate with loan loss provision. It means that increase in bank size, capital adequacy ratio, GDP growth rate and inflation rate leads to increase loan loss provision. The result reveals that the beta coefficient is positive for bank size with risk weighted exposure. However, beta coefficient is negative for bank size with impaired loan and loan loss provision. The result indicates that larger the bank size higher would be the risk weighted exposure. The result reveals the negative beta coefficient for capital adequacy ratio with risk weighted exposure, impaired loan and loan loss provision. The capital adequacy ratio is significant at 5 percent level. The result hence indicates that higher the capital adequacy ratio lower would be the risk weighted exposure, impaired loan and loan loss provision. The result found positive beta coefficient for operational inefficiency with risk weighted exposure, impaired loan and loan loss provision. The operational inefficiency is significant at 1 percent level of significance. The result hence indicates that higher the operational inefficiency higher would be the risk weighted exposure, impaired loan and loan loss provision. Positive relation between money supply and risk weighted exposure and impaired loan has been observed which indicates higher the money supply higher would be the risk weighted exposure and impaired loan. However, beta coefficient for money supply is negative with loan loss provision which indicates that higher the money supply lower would be the loan loss provision.
The determinants of credit risk in Nepalese banking industry [printed text] / Sher Bahadur Darai, Author . - 2017 . - 98p. ; GRP/Thesis + 7/B.
Languages : English
Descriptors: Credit risk Class number: 332.7 Abstract: The credit risk in commercial banks has been on the limelight with regards to problems facing global financial institutions. A look around on the causes of global financial crisis, the Euro zone crisis and the fall of world greatest institutions such as Enron boils down to the question of how best is credit risk being managed. The magnitude of the financial crisis clearly demonstrates how critical commercial banks have been interconnected to the world economy (Angello & Sousa, 2012). A commercial bank exists not only to accept deposit but also to grant credit facilities, therefore inevitably exposed to credit risk. Credit risk is by far the most significant risk faced by banks and the success of their business depends upon accurate measurement and efficient management of this risk to a greater extent than any other risk (Giesecke, 2004)
Credit risk plays a vital role in banking business, so bankers and regulators try to make their own model to increase their loan portfolio quality. Among the several risk in bank, credit risk is primary cause of bank failure (Bhattacharya & Roy, 2008). It has found that effective Credit Risk Management (CRM) is essential for banking in order to minimize credit losses (Santomero, 1997).Credit risk management is indeed a very difficult and complex task in the financial industry because of the unpredictable mature of macroeconomic factors coupled with the various microeconomics variables which are peculiar to the banking industry or specific to a particular bank (Garr, 2013).
The major objective of the study is to examine the determinants of credit risk in context Nepalese commercial banks. The specific objective s of this study are: a) to examine the structure and pattern of risk weighted exposure, impaired loans and loan loss Provision of Nepalese commercial banks, b) to examine the structure and pattern of selected bank specific and macroeconomic factors of Nepalese commercial banks, c) To find out the relation of selected bank specific and macroeconomic factors with credit risk of Nepalese commercial banks, d) to analyze the most important factors affecting credit risk of Nepalese commercial.
This study has employed descriptive research design and causal comparative research design to deal with issues associated with factors influencing credit risk of the commercial banks in the context of Nepal. This study is based on the secondary data which are gathered for 20 commercial banks in Nepal. The main sources of the data are Annual Supervision Report and Economic Bulletin published by Nepal Rastra Bank and annual report of selected commercial banks. The data are collected on risk weighted exposure, impaired loans, loan loss provision, bank size, capital adequacy ratio, operational inefficiency, gross domestic product (GDP), money supply and inflation rate. Cross sectional data are used in this study where 20 commercial banks out of 30 in Nepal are included over the period of 2007/08 to 2013/14.
The result shows bank size, money supply and inflation rate is positively related to risk weighted exposure. It means that increase in bank size, money supply and inflation rate leads to increases in risk weighted exposure. Capital adequacy ratio is negatively related to risk weighted exposure indicating that increase in capital adequacy ratio leads to decrease in risk weighted exposure. Likewise, GDP growth rate is also negatively related to risk weighted exposure. Operational inefficiency is positively related to loan loss provision which indicates that higher the operational inefficiency higher would be the loan loss provision. There is negative correlation between bank size, capital adequacy ratio, GDP growth rate and inflation rate with loan loss provision. It means that increase in bank size, capital adequacy ratio, GDP growth rate and inflation rate leads to increase loan loss provision. The result reveals that the beta coefficient is positive for bank size with risk weighted exposure. However, beta coefficient is negative for bank size with impaired loan and loan loss provision. The result indicates that larger the bank size higher would be the risk weighted exposure. The result reveals the negative beta coefficient for capital adequacy ratio with risk weighted exposure, impaired loan and loan loss provision. The capital adequacy ratio is significant at 5 percent level. The result hence indicates that higher the capital adequacy ratio lower would be the risk weighted exposure, impaired loan and loan loss provision. The result found positive beta coefficient for operational inefficiency with risk weighted exposure, impaired loan and loan loss provision. The operational inefficiency is significant at 1 percent level of significance. The result hence indicates that higher the operational inefficiency higher would be the risk weighted exposure, impaired loan and loan loss provision. Positive relation between money supply and risk weighted exposure and impaired loan has been observed which indicates higher the money supply higher would be the risk weighted exposure and impaired loan. However, beta coefficient for money supply is negative with loan loss provision which indicates that higher the money supply lower would be the loan loss provision.
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Barcode Call number Media type Location Section Status 378/D 332.7 DAR Thesis/Dissertation Uniglobe Library Social Sciences Available
Title : The impact of credit risk management on financial performance of Nepalese commercial banks Material Type: printed text Authors: Dibash Ravi, Author Publication Date: 2016 Pagination: 83p. Size: GRP/Thesis Accompanying material: 2016 Languages : English Descriptors: Credit-management Class number: 332.7 Abstract: Commercial banks play an important role for economic development and foster economic growth by providing number of financial services. Since one of the important functions of commercial banks is to play role of mediator between surplus unit and deficit unit, banks reserve a number of risks. Among them credit risk which is related to substantial amount of income generating assets is found to be important determinant of bank performance (Rose & Hudgins, 2005). Credit risk plays an important role on banks profitability since a large chunk of banks revenue accrues from loans from which interest is derived. Effectively managing credit risk in financial institutions is critical for the survival and growth of the financial institutions (Oke et al., 2012).
The study basically aims at evaluating the impact of credit risk management on financial performance of Nepalese commercial banks. Bakaeva et al. (2009) found positive relationship between credit risk management and profitability of commercial banks in Sweden. Kolapo and Oke (2012) showed that credit risk management is positively related to profitability of banks in Nigeria Godlewski (2004), Bourke (1989), Amato (2007) and Rostami, (2011) stated that there is negative association between credit risk variable and banks performance. Paudel (2006) found that interest income from loan and advances are the main sources of income, which increases the profit of commercial banks. Still there is a gap in the financial literatureconcerning the effect of credit risk on the performance of Nepalese commercial bank.
This study is based on the secondary data that have been collected from Banking and Financial Statistics and Bank Supervision Report published by Nepal Rastra Bank and Annual Reports of the selected 25 commercial banksfrom fiscal year 2007 to fiscal year 2013 leading to a total of 149 observations. This study has employed descriptive research design and causal comparative research design to deal with issues associated with the credit risk management and financial performance of Nepalese commercial banks.
The resultshows that NBBL has highest average ROA, ROE and NIMamong selected commercial banks throughout the study period andaverage ROA and ROEhas been decreased over the study period while NIM has increased over the study period. Similarly, the average leverage ratio is highest for EBL and the average capital adequacy ratio is highest forCENBL. The average CAR has decreased over the study period. Likewise, the average non-performing loan ratio of NBBL is highest among the selected commercial banks. The average loan loss provision and Credit interest to credit facilities are highest for ADBL.
The return on assets has mean of 1.764 percent and return on equity with mean of 17.71 percent. The net interest margin of selected banks has an average of 3.66 percent.The average of capital adequacy ratio is 13.6 percent. Likewise, the leverage ratio has an average of 6.864 times and non-performing loan ratio has an average of 0.022 times. Similarly, credit interest to credit facilitieswith mean value of 10.27 percent. And loan loss provision ratio with an average of 3.61 times.
The correlation matrix of banks shows that capital adequacy ratio is negatively correlated to return on assets and return on equity. However, the capital adequacy ratio is positively correlated to NIM. The result show that leverage ratio is negatively correlated to return on assets and net interest margin however, it is positively correlated to return on equity. Similarly, non-performing loan ratio and loan loss provision ratio is also negatively correlated to bank profitability. Whereas credit interest to credit facilities is positively associated to bank profitability.
Regression analysis revealed that capital adequacy ratio has negative and significant impact on return on assets and return on equity, whereas it is positively related to net interest margin. Likewise, credit interest to credit facilities has positive and significant impact on return on assets, return on equity and net interest margin. Loan loss provision ratio has also negative and significant impact on return on assets and return on equity and net interest margin. Therefore, the study concluded that loan loss provision ratio (LLPR) and non-performing loan ratio (NPLR) are the major factors affecting banks performance in Nepalese commercial banks.
The impact of credit risk management on financial performance of Nepalese commercial banks [printed text] / Dibash Ravi, Author . - 2016 . - 83p. ; GRP/Thesis + 2016.
Languages : English
Descriptors: Credit-management Class number: 332.7 Abstract: Commercial banks play an important role for economic development and foster economic growth by providing number of financial services. Since one of the important functions of commercial banks is to play role of mediator between surplus unit and deficit unit, banks reserve a number of risks. Among them credit risk which is related to substantial amount of income generating assets is found to be important determinant of bank performance (Rose & Hudgins, 2005). Credit risk plays an important role on banks profitability since a large chunk of banks revenue accrues from loans from which interest is derived. Effectively managing credit risk in financial institutions is critical for the survival and growth of the financial institutions (Oke et al., 2012).
The study basically aims at evaluating the impact of credit risk management on financial performance of Nepalese commercial banks. Bakaeva et al. (2009) found positive relationship between credit risk management and profitability of commercial banks in Sweden. Kolapo and Oke (2012) showed that credit risk management is positively related to profitability of banks in Nigeria Godlewski (2004), Bourke (1989), Amato (2007) and Rostami, (2011) stated that there is negative association between credit risk variable and banks performance. Paudel (2006) found that interest income from loan and advances are the main sources of income, which increases the profit of commercial banks. Still there is a gap in the financial literatureconcerning the effect of credit risk on the performance of Nepalese commercial bank.
This study is based on the secondary data that have been collected from Banking and Financial Statistics and Bank Supervision Report published by Nepal Rastra Bank and Annual Reports of the selected 25 commercial banksfrom fiscal year 2007 to fiscal year 2013 leading to a total of 149 observations. This study has employed descriptive research design and causal comparative research design to deal with issues associated with the credit risk management and financial performance of Nepalese commercial banks.
The resultshows that NBBL has highest average ROA, ROE and NIMamong selected commercial banks throughout the study period andaverage ROA and ROEhas been decreased over the study period while NIM has increased over the study period. Similarly, the average leverage ratio is highest for EBL and the average capital adequacy ratio is highest forCENBL. The average CAR has decreased over the study period. Likewise, the average non-performing loan ratio of NBBL is highest among the selected commercial banks. The average loan loss provision and Credit interest to credit facilities are highest for ADBL.
The return on assets has mean of 1.764 percent and return on equity with mean of 17.71 percent. The net interest margin of selected banks has an average of 3.66 percent.The average of capital adequacy ratio is 13.6 percent. Likewise, the leverage ratio has an average of 6.864 times and non-performing loan ratio has an average of 0.022 times. Similarly, credit interest to credit facilitieswith mean value of 10.27 percent. And loan loss provision ratio with an average of 3.61 times.
The correlation matrix of banks shows that capital adequacy ratio is negatively correlated to return on assets and return on equity. However, the capital adequacy ratio is positively correlated to NIM. The result show that leverage ratio is negatively correlated to return on assets and net interest margin however, it is positively correlated to return on equity. Similarly, non-performing loan ratio and loan loss provision ratio is also negatively correlated to bank profitability. Whereas credit interest to credit facilities is positively associated to bank profitability.
Regression analysis revealed that capital adequacy ratio has negative and significant impact on return on assets and return on equity, whereas it is positively related to net interest margin. Likewise, credit interest to credit facilities has positive and significant impact on return on assets, return on equity and net interest margin. Loan loss provision ratio has also negative and significant impact on return on assets and return on equity and net interest margin. Therefore, the study concluded that loan loss provision ratio (LLPR) and non-performing loan ratio (NPLR) are the major factors affecting banks performance in Nepalese commercial banks.
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Barcode Call number Media type Location Section Status 228/D 332.7 RAV Thesis/Dissertation Uniglobe Library Social Sciences Available
Title : The impact of credit risk management on profitability of commercial banks in Nepal Material Type: printed text Authors: Divash Shakya, Author Publication Date: 2016 Pagination: 81p. Size: GRP/Thesis Accompanying material: 5/B General note: Including bibilography Languages : English Descriptors: Bank loans-Management
Banks
Banks and banking
Commercial banks
Consumer credit-Management
Credit-Management
Financial risk management
Risk managementKeywords: 'credit risk management commercial banks return on equity return on assets banks loan' Class number: 332.7 Abstract: Commercial banks are the major financial intermediaries in any economy and they are the major providers of credits to the household and corporate sector and operate the payment mechanism (Magnifique, 2011). In today’s fast-moving business environment, banks are exposed to a large number of risks such as credit risk, liquidity risk, market risk, operational risk, interest rate exchange risk etc For instance, commercial banks hold deposits, bundling them together as loans, operating payments mechanism etc. Particularly, banks make profits by selling liabilities with one set of characteristics (a particular combination of liquidity risk and return) and using the proceeds to buy assets with different set of characteristics i.e. asset transformation. Credit risk management should be at the centre of banks operations in order to maintain financial sustainability and reaching more clients. Nzuve (2016) stated credit risk management models included the systems, procedures and control which a company has in place to ensure the efficient collection of customer payments and the risk of non-payment.
The major purpose of this study is to identify the relationship between credit risk and bank performance in Nepalese commercial banks. The specific objectives are: to analyze the structure and pattern of dependent (ROA and ROE) and independent variables (NPL, cost per loan assets, capital adequacy, cash reserve ratio, leverage and assets growth ratio), to examine the relationship between non-performing loan ratio and bank performance, to identify the effect of cost per loan assets, cash reserve ratio, leverage, assets growth ratio and capital adequacy ratio on bank performance and to determine the major variable influencing the performance of Nepalese commercial banks.
This study based on the secondary of data which were gather for a sample of 18 commercial banks of Nepal within the time period from 2007/08 to 2013/14, leading to the total of 126 observations. The secondary data have been obtain from Nepal Rastra Bank bulletin published by central bank of Nepal, annual audited financial statements and websites of respective commercial banks. The polled cross-sectional data analysis has been undertaken in the study. The research design adopted in this study is causal comparative types as it deals with relationship of bank specific factors like capital adequacy ratio, non-performing loan ratio, cost per loan assets, cash reserve ratio, assets growth ratio and leverage ratio with dependent variable such as: ROA (return on assets) and ROE (return on equity). The statistical methods used in the analysis are descriptive statistics, correlation analysis and regression analysis.
The result shows that capital adequacy ratio, cost per loan assets and assets growth ratio are positively related with return on assets and return on equity. It indicates that higher the capital adequacy ratio, higher would be the return on assets and return on equity. Similarly, increase in cost per loan assets leads to an increase in return on assets and return on equity. Likewise, higher the assets growth ratio, higher would be the return on assets and return on equity. The results also shows that non-performing loan ratio, cash reserve ratio and leverage ratio are negatively related with return on assets and return on equity which reveals that increase in non-performing loan ratio leads to decrease in return on assets and return on equity. Similarly, higher the cash reserve ratio, lower would be the return on assets and return on equity. Likewise, increase in leverage ratio leads to a decrease in return on assets and return on equity. The beta coefficient is positive for capital adequacy ratio, cost per loan assets and assets growth ratio and bank performance whereas the beta coefficient is negative for non-performing loan ratio, cash reserve ratio and leverage ratio and bank performance. The beta coefficient is significant for capital adequacy ratio, non-performing loan ratio, assets growth ratio and leverage ratio at 5 percent level of significance.
The major conclusion of this study is that bank performance of Nepalese commercial banks is affected by credit risk factors and its management. Capital adequacy ratio, cost per loan assets and assets growth ratio is an internal factor which have significant positive effect on return on assets of Nepalese commercial banks. It indicates higher the capital adequacy ratio, cost per loan assets and assets growth ratio, higher would be the return on assets. However, non-performing loan ratio, cash reserve ratio and leverage ratio have significant negative effect on return on assets. It indicates that higher the non-performing loan, cash reserve ratio and leverage ratio, lower would be the return on assets. The study also concludes that capital adequacy ratio, cost per loan assets and assets growth ratio have significant positive effect on return on equity of Nepalese commercial banksThe impact of credit risk management on profitability of commercial banks in Nepal [printed text] / Divash Shakya, Author . - 2016 . - 81p. ; GRP/Thesis + 5/B.
Including bibilography
Languages : English
Descriptors: Bank loans-Management
Banks
Banks and banking
Commercial banks
Consumer credit-Management
Credit-Management
Financial risk management
Risk managementKeywords: 'credit risk management commercial banks return on equity return on assets banks loan' Class number: 332.7 Abstract: Commercial banks are the major financial intermediaries in any economy and they are the major providers of credits to the household and corporate sector and operate the payment mechanism (Magnifique, 2011). In today’s fast-moving business environment, banks are exposed to a large number of risks such as credit risk, liquidity risk, market risk, operational risk, interest rate exchange risk etc For instance, commercial banks hold deposits, bundling them together as loans, operating payments mechanism etc. Particularly, banks make profits by selling liabilities with one set of characteristics (a particular combination of liquidity risk and return) and using the proceeds to buy assets with different set of characteristics i.e. asset transformation. Credit risk management should be at the centre of banks operations in order to maintain financial sustainability and reaching more clients. Nzuve (2016) stated credit risk management models included the systems, procedures and control which a company has in place to ensure the efficient collection of customer payments and the risk of non-payment.
The major purpose of this study is to identify the relationship between credit risk and bank performance in Nepalese commercial banks. The specific objectives are: to analyze the structure and pattern of dependent (ROA and ROE) and independent variables (NPL, cost per loan assets, capital adequacy, cash reserve ratio, leverage and assets growth ratio), to examine the relationship between non-performing loan ratio and bank performance, to identify the effect of cost per loan assets, cash reserve ratio, leverage, assets growth ratio and capital adequacy ratio on bank performance and to determine the major variable influencing the performance of Nepalese commercial banks.
This study based on the secondary of data which were gather for a sample of 18 commercial banks of Nepal within the time period from 2007/08 to 2013/14, leading to the total of 126 observations. The secondary data have been obtain from Nepal Rastra Bank bulletin published by central bank of Nepal, annual audited financial statements and websites of respective commercial banks. The polled cross-sectional data analysis has been undertaken in the study. The research design adopted in this study is causal comparative types as it deals with relationship of bank specific factors like capital adequacy ratio, non-performing loan ratio, cost per loan assets, cash reserve ratio, assets growth ratio and leverage ratio with dependent variable such as: ROA (return on assets) and ROE (return on equity). The statistical methods used in the analysis are descriptive statistics, correlation analysis and regression analysis.
The result shows that capital adequacy ratio, cost per loan assets and assets growth ratio are positively related with return on assets and return on equity. It indicates that higher the capital adequacy ratio, higher would be the return on assets and return on equity. Similarly, increase in cost per loan assets leads to an increase in return on assets and return on equity. Likewise, higher the assets growth ratio, higher would be the return on assets and return on equity. The results also shows that non-performing loan ratio, cash reserve ratio and leverage ratio are negatively related with return on assets and return on equity which reveals that increase in non-performing loan ratio leads to decrease in return on assets and return on equity. Similarly, higher the cash reserve ratio, lower would be the return on assets and return on equity. Likewise, increase in leverage ratio leads to a decrease in return on assets and return on equity. The beta coefficient is positive for capital adequacy ratio, cost per loan assets and assets growth ratio and bank performance whereas the beta coefficient is negative for non-performing loan ratio, cash reserve ratio and leverage ratio and bank performance. The beta coefficient is significant for capital adequacy ratio, non-performing loan ratio, assets growth ratio and leverage ratio at 5 percent level of significance.
The major conclusion of this study is that bank performance of Nepalese commercial banks is affected by credit risk factors and its management. Capital adequacy ratio, cost per loan assets and assets growth ratio is an internal factor which have significant positive effect on return on assets of Nepalese commercial banks. It indicates higher the capital adequacy ratio, cost per loan assets and assets growth ratio, higher would be the return on assets. However, non-performing loan ratio, cash reserve ratio and leverage ratio have significant negative effect on return on assets. It indicates that higher the non-performing loan, cash reserve ratio and leverage ratio, lower would be the return on assets. The study also concludes that capital adequacy ratio, cost per loan assets and assets growth ratio have significant positive effect on return on equity of Nepalese commercial banksHold
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Barcode Call number Media type Location Section Status 239/D 332.7 SHA Thesis/Dissertation Uniglobe Library Social Sciences Available
Title : The impact of credit risk management on the financial performance of Nepalese commercial bank: a comparative study of public banks, joint venture banks and private banks Material Type: printed text Authors: Printa Shakya, Author Publication Date: 2017 Pagination: 118p. Size: GRP/Thesis Accompanying material: 8/B Languages : English Descriptors: Credit-Management Class number: 332.7 Abstract: A commercial bank is an institution that provides financial services, including issuing money in various forms, receiving deposits of money, lending money and processing transactions and the creating of credit (Campbell, 2007). It plays an important role for economic development and foster economic growth by providing number of financial services. One of the important functions of the commercial bank is the financial intermediation and thus it transfers the fund from surplus units to the deficit units. It accepts deposits and provides loan and advances to the needed people, institutions and investors. It also invests in several short term and long term projects. Thus, it is constantly facing different types of risk.Credit risk is by far the most significant risk faced by banks and the success of their business depends on accurate measurement and efficient management of this risk to a greater extent than any other risk (Gieseche, 2004). Credit risk management is very important to banks as it is an integral part of the loan process. The importance of strong credit risk management for building quality loan portfolio is of paramount importance to robust performance of commercial banks as well as overall economy (Charles and Kenneth, 2013). Thus, the importance of credit risk management in banks is due to its ability in affecting the bank’s financial performance, existence and growth.
This study attempts to examine the impact of credit risk management on financial performance of the Nepalese commercial banks. The study is based on secondary data of 20 commercial banks with 140 observations for the period of 2008/09 to 2014/15. The main source of data includes various issues of Banking and Financial Statistics, Quarterly Economic Bulletin, Bank Supervision Report published by Nepal Rastra Bank and annual reports of selected commercial banks. The research design adopted in this study is descriptive and causal comparative research design as it deals with the impact of credit risk management on financial performance of Nepalese commercial banks.
The average return on assets is highest for NBBL (5.32 percent) and lowest for MBL (0.59 percent). The average return on equity is highest for NBBL (45.57 percent) and lowest for NBL (-49.54 percent).Likewise, the average net interest margin is highest for ADBL (5.89 percent) and lowest for NMB (2.34 percent).The structure and pattern analysis of average capital adequacy ratio shows that NMB has the highest average (20.10 percent) and RBBL has the lowest capital adequacy ratio of (-11.13 percent).RBBL has the highest non-performing loan (8.28 percent) and EBL has the lowest (0.53 percent).ADBL has the highest average loans and advances to deposit ratio (98.36 percent) and RBBL has the lowest (52.20 percent).The structure and pattern analysis of average deposit shows that RBBL has the highest average (Rs 88.70 billion) and LBL has the lowest of (Rs 10.72 billion).Similarly, NIBL has the highest bank size of (Rs. 24.96 billion) and ADBLhas the lowest (Rs. 19.51 billion).
The descriptive statistics for the public banks reveals that the average return on assets, return on equity, net interest margin, capital adequacy ratio, non-performing loan, loans and advances to deposit ratio, bank size and deposit is 1.93 percent, -6.01 percent, 4.10 percent, 0.27 percent, 6.63 percent, 69.28 percent, Rs24.99 billion and Rs 64.90 billion respectively. Similarly, the descriptive statistics for the joint venture banks reveals that the average return on assets, return on equity, net interest margin, capital adequacy ratio, non-performing loan, loans and advances to deposit ratio, bank size and deposit is 2.50 percent, 24.96 percent, 3.63 percent, 11.99 percent, 2.24 percent, 68.62 percent, Rs24.55 billion and Rs 44.91 billion respectively. Likewise, the descriptive statistics for the private bank reveals that the average return on assets, return on equity, net interest margin, capital adequacy ratio, non-performing loan, loans and advances to deposit ratio, bank size and deposit is 1.48 percent, 14.92 percent, 3.09 percent, 13.25 percent, 1.79 percent, 79.67 percent, Rs23.94 billion and Rs 25.95 billion respectively.
The correlation analysis for public banks shows that deposit,capital adequacy ratio, loans and advances to deposit ratio and bank size arepositively related to return on assets, return on equity as well as net interest margin, while nonperforming loan is negatively related to return on assets, return on equity as well as net interest margin. The correlation analysis for joint venture banks shows that loans and advances to deposit ratio, bank size and deposit are positively related to return on assets, return on equity as well as net interest margin. However, non-performing loans are negatively related to return on assets, return on equity as well as net interest margin. Likewise, capital adequacy ratio is negatively related to return on assets and net interest margin. The correlation analysis for private banks shows that bank size and deposit are positively related to return on assets and net interest margin. The result also shows that loans and advances to deposit ratio and capital adequacy ratio are negatively related to return on equity whereas it is positively related with return on assets and net interest margin. Nonperforming loans is negatively related to return on assets, return on equity and net interest margin.
The regression analysis reveals that non-performing loanshave negative impact on return on assets in all the sectors included in the study. This indicates that higher return on assets, lower would be the non-performing loan. However, loans and advances to deposit ratio has positive impact on return on equity in all the sectors included in the study. This reveals that higher the loans and advances to deposit ratio, higher would be the return on assets. Similarly deposit and bank size has positive impact on return on assets in all the sectors included in the study. This states that higher the deposit and bank size, higher would be the return on assets.
The study also shows that capital adequacy ratio has positive impact return on assets and net interest margin in public and joint venture banks. This reveals that higher the capital adequacy ratio, higher would be the return on assets andnet interest margin. However, loans and advances to deposit ratio has negative impact return on equity in private banks. This states that higher the loans and advances to deposit ratio, lower would be the return on equity. On the other hand, the deposit and bank size has positive impact on return on equity and net interest margin in all the sectors included in the study. This denotes that higher the bank size and return on equity, higher would be the bank size and deposit.
The impact of credit risk management on the financial performance of Nepalese commercial bank: a comparative study of public banks, joint venture banks and private banks [printed text] / Printa Shakya, Author . - 2017 . - 118p. ; GRP/Thesis + 8/B.
Languages : English
Descriptors: Credit-Management Class number: 332.7 Abstract: A commercial bank is an institution that provides financial services, including issuing money in various forms, receiving deposits of money, lending money and processing transactions and the creating of credit (Campbell, 2007). It plays an important role for economic development and foster economic growth by providing number of financial services. One of the important functions of the commercial bank is the financial intermediation and thus it transfers the fund from surplus units to the deficit units. It accepts deposits and provides loan and advances to the needed people, institutions and investors. It also invests in several short term and long term projects. Thus, it is constantly facing different types of risk.Credit risk is by far the most significant risk faced by banks and the success of their business depends on accurate measurement and efficient management of this risk to a greater extent than any other risk (Gieseche, 2004). Credit risk management is very important to banks as it is an integral part of the loan process. The importance of strong credit risk management for building quality loan portfolio is of paramount importance to robust performance of commercial banks as well as overall economy (Charles and Kenneth, 2013). Thus, the importance of credit risk management in banks is due to its ability in affecting the bank’s financial performance, existence and growth.
This study attempts to examine the impact of credit risk management on financial performance of the Nepalese commercial banks. The study is based on secondary data of 20 commercial banks with 140 observations for the period of 2008/09 to 2014/15. The main source of data includes various issues of Banking and Financial Statistics, Quarterly Economic Bulletin, Bank Supervision Report published by Nepal Rastra Bank and annual reports of selected commercial banks. The research design adopted in this study is descriptive and causal comparative research design as it deals with the impact of credit risk management on financial performance of Nepalese commercial banks.
The average return on assets is highest for NBBL (5.32 percent) and lowest for MBL (0.59 percent). The average return on equity is highest for NBBL (45.57 percent) and lowest for NBL (-49.54 percent).Likewise, the average net interest margin is highest for ADBL (5.89 percent) and lowest for NMB (2.34 percent).The structure and pattern analysis of average capital adequacy ratio shows that NMB has the highest average (20.10 percent) and RBBL has the lowest capital adequacy ratio of (-11.13 percent).RBBL has the highest non-performing loan (8.28 percent) and EBL has the lowest (0.53 percent).ADBL has the highest average loans and advances to deposit ratio (98.36 percent) and RBBL has the lowest (52.20 percent).The structure and pattern analysis of average deposit shows that RBBL has the highest average (Rs 88.70 billion) and LBL has the lowest of (Rs 10.72 billion).Similarly, NIBL has the highest bank size of (Rs. 24.96 billion) and ADBLhas the lowest (Rs. 19.51 billion).
The descriptive statistics for the public banks reveals that the average return on assets, return on equity, net interest margin, capital adequacy ratio, non-performing loan, loans and advances to deposit ratio, bank size and deposit is 1.93 percent, -6.01 percent, 4.10 percent, 0.27 percent, 6.63 percent, 69.28 percent, Rs24.99 billion and Rs 64.90 billion respectively. Similarly, the descriptive statistics for the joint venture banks reveals that the average return on assets, return on equity, net interest margin, capital adequacy ratio, non-performing loan, loans and advances to deposit ratio, bank size and deposit is 2.50 percent, 24.96 percent, 3.63 percent, 11.99 percent, 2.24 percent, 68.62 percent, Rs24.55 billion and Rs 44.91 billion respectively. Likewise, the descriptive statistics for the private bank reveals that the average return on assets, return on equity, net interest margin, capital adequacy ratio, non-performing loan, loans and advances to deposit ratio, bank size and deposit is 1.48 percent, 14.92 percent, 3.09 percent, 13.25 percent, 1.79 percent, 79.67 percent, Rs23.94 billion and Rs 25.95 billion respectively.
The correlation analysis for public banks shows that deposit,capital adequacy ratio, loans and advances to deposit ratio and bank size arepositively related to return on assets, return on equity as well as net interest margin, while nonperforming loan is negatively related to return on assets, return on equity as well as net interest margin. The correlation analysis for joint venture banks shows that loans and advances to deposit ratio, bank size and deposit are positively related to return on assets, return on equity as well as net interest margin. However, non-performing loans are negatively related to return on assets, return on equity as well as net interest margin. Likewise, capital adequacy ratio is negatively related to return on assets and net interest margin. The correlation analysis for private banks shows that bank size and deposit are positively related to return on assets and net interest margin. The result also shows that loans and advances to deposit ratio and capital adequacy ratio are negatively related to return on equity whereas it is positively related with return on assets and net interest margin. Nonperforming loans is negatively related to return on assets, return on equity and net interest margin.
The regression analysis reveals that non-performing loanshave negative impact on return on assets in all the sectors included in the study. This indicates that higher return on assets, lower would be the non-performing loan. However, loans and advances to deposit ratio has positive impact on return on equity in all the sectors included in the study. This reveals that higher the loans and advances to deposit ratio, higher would be the return on assets. Similarly deposit and bank size has positive impact on return on assets in all the sectors included in the study. This states that higher the deposit and bank size, higher would be the return on assets.
The study also shows that capital adequacy ratio has positive impact return on assets and net interest margin in public and joint venture banks. This reveals that higher the capital adequacy ratio, higher would be the return on assets andnet interest margin. However, loans and advances to deposit ratio has negative impact return on equity in private banks. This states that higher the loans and advances to deposit ratio, lower would be the return on equity. On the other hand, the deposit and bank size has positive impact on return on equity and net interest margin in all the sectors included in the study. This denotes that higher the bank size and return on equity, higher would be the bank size and deposit.
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Barcode Call number Media type Location Section Status 339/D 332.7 SHA Thesis/Dissertation Uniglobe Library Social Sciences Available
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