| 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.
|
|
Refine your search Apply to external sourcesBank credit management: text and ases / Uijayaragavani
