Welcome to the Uniglobe Library
From this page you can:
Home |
Author details
Author Ravi Dhungel |
Available item(s) by this author
Refine your search Apply to external sources
Relationship among non -interest income, profitability and risk in nepalese commercials banks / Ravi Dhungel
Title : Relationship among non -interest income, profitability and risk in nepalese commercials banks Material Type: printed text Authors: Ravi Dhungel, Author Publication Date: 2019 Pagination: 111p. Size: GRP/Thesis Accompanying material: 15th Languages : English Abstract: The liberalization has led banks to increasingly shift away from traditional lending activities towards non-traditional sources of income such as fees, commissions, and trading securities for higher profits. Fierce competition among them made income diversification an integral part of their business model. In order to move away from interest-based lending activities to non-interest based activities, they need to have a sophisticated technological scale, skills, resources, and capacity. Therefore, the effect of income diversification on profitability might always vary across banks, across different ownership groups (Mercieca et al., 2007; Pennathur et al., 2012). The economic theory suggests that, banks’ profitability should increase if there are various revenue stems and diversified financial. It suggests that banks with greater diversification through non-traditional sources of income can reduce income volatility substantially and well-diversified bank can materialize many benefits through the non-intermediation activities (Ahamed, 2017).
Goddard et al. (2008) examined the reduction of idiosyncratic risk and the strengthening of the financial system as the motives for diversification. The study found a positive impact of diversification on profitability. However, Acharya et al. (2006) found that diversification of loans does not typically enhance profitability or reduce risk in Italian banks. In addition, Stiroh and Rumble (2006) argued that if commercial banks have investment banking window and some fee-based income stems from investment banking activities, those earnings are more volatile than traditional lending activities, and thus banks with a higher portion of non-traditional income streams would be less profitable.
The study is based on secondary data of 22 commercial banks with 154 observations for the period of 2011/12 to 2017/18. Data and information have been collected from the annual reports of selected commercial banks, banking and financial statistics and bank supervision report published by NRB. The statistical methods used in the analysis are descriptive statistics, correlation analysis and regression analysis.
The study reveals that return on assets is highest for ADBL (2.53 %) and lowest average for PBL (0.48 %). It has been found that the average return on assets has increasing trend across the year. The analysis shows that average RAROA is highest for SBL (7.373), and lowest for PBL (0.226). It has been found that the average RAROA has been fluctuating over the study period. The average non-interest income is highest for SCBNL (31.87 %) and lowest for ADBL (13.67 %), and has been found that non-interest income among the Nepalese commercial banks have been highly fluctuating over the study period. Also, average HHI is highest for ADBL (0.765) and lowest for SCBL (0.567). It has been found HHI among the Nepalese commercial banks have been highly fluctuating over the study period. The result shows that average equity is highest for SCBNL (18.76%) and lowest for NBL (7.54%) and has been found that the average bank equity ratio has increasing trend. The average bank size has increasing trend during the study period. The analysis shows that of average bank size is highest for highest for NIBL (Rs. 113.03 billion) and lowest for JBL (Rs. 32.81 billion). The analysis of structure and pattern of average loan is highest for JBL (74.11%) and lowest for SCBNL (49.02 percent). It has been found that average loan to total assets have been in increasing trend for almost all the Nepalese commercial banks in recent years.
The Pearson’s correlation coefficients matrix of the Nepalese commercial banks shows that non-interest income, equity and bank size has positive relationship with return on assets. However, HHI and loan ratio has negative relationship with return on assets. Likewise, the result shows that non-interest income, equity, bank size and loan are positively correlated to risk-adjusted return on assets. However, HHI is negatively correlated to risk-adjusted return on assets
The regression result shows equity to total assets ratio and bank size are positive and significant with return on assets at one percent level. It indicates that equity ratio and bank size have positive impact on return on assets. In the same way, the analysis reveals non-interest income are positive with return on assets. It indicates that non-interest income has positive impact on return on assets. However, HHI and loan to total assets ratio have negative impact on return on assets. Similarly, the regression analysis shows that total assets ratio is positive and significant with risk-adjusted return on assets at one percent level. It implies that bank size has negative impact on bank risk. Likewise, non-interest income is positive and significant with risk-adjusted return on assets implying that higher the non-interest income lower would be the bank risk. Similarly, the result shows that equity to total assets ratio and loan to total asset ratio have positive impact in risk-adjusted return on assets implying that higher the equity and loan lower would be the bank risk. However, the regression analysis shows that the beta coefficients HHI are negative with risk-adjusted return on assets implying that diversification (HHI) increases the bank risk.
Finally, the study concludes that bank size followed by equity to total assets is the most influencing factor that explains the profitability in Nepalese commercial banks. Similarly, bank size is the most influencing factor that explains the level of risk in Nepalese commercial banks.
Relationship among non -interest income, profitability and risk in nepalese commercials banks [printed text] / Ravi Dhungel, Author . - 2019 . - 111p. ; GRP/Thesis + 15th.
Languages : English
Abstract: The liberalization has led banks to increasingly shift away from traditional lending activities towards non-traditional sources of income such as fees, commissions, and trading securities for higher profits. Fierce competition among them made income diversification an integral part of their business model. In order to move away from interest-based lending activities to non-interest based activities, they need to have a sophisticated technological scale, skills, resources, and capacity. Therefore, the effect of income diversification on profitability might always vary across banks, across different ownership groups (Mercieca et al., 2007; Pennathur et al., 2012). The economic theory suggests that, banks’ profitability should increase if there are various revenue stems and diversified financial. It suggests that banks with greater diversification through non-traditional sources of income can reduce income volatility substantially and well-diversified bank can materialize many benefits through the non-intermediation activities (Ahamed, 2017).
Goddard et al. (2008) examined the reduction of idiosyncratic risk and the strengthening of the financial system as the motives for diversification. The study found a positive impact of diversification on profitability. However, Acharya et al. (2006) found that diversification of loans does not typically enhance profitability or reduce risk in Italian banks. In addition, Stiroh and Rumble (2006) argued that if commercial banks have investment banking window and some fee-based income stems from investment banking activities, those earnings are more volatile than traditional lending activities, and thus banks with a higher portion of non-traditional income streams would be less profitable.
The study is based on secondary data of 22 commercial banks with 154 observations for the period of 2011/12 to 2017/18. Data and information have been collected from the annual reports of selected commercial banks, banking and financial statistics and bank supervision report published by NRB. The statistical methods used in the analysis are descriptive statistics, correlation analysis and regression analysis.
The study reveals that return on assets is highest for ADBL (2.53 %) and lowest average for PBL (0.48 %). It has been found that the average return on assets has increasing trend across the year. The analysis shows that average RAROA is highest for SBL (7.373), and lowest for PBL (0.226). It has been found that the average RAROA has been fluctuating over the study period. The average non-interest income is highest for SCBNL (31.87 %) and lowest for ADBL (13.67 %), and has been found that non-interest income among the Nepalese commercial banks have been highly fluctuating over the study period. Also, average HHI is highest for ADBL (0.765) and lowest for SCBL (0.567). It has been found HHI among the Nepalese commercial banks have been highly fluctuating over the study period. The result shows that average equity is highest for SCBNL (18.76%) and lowest for NBL (7.54%) and has been found that the average bank equity ratio has increasing trend. The average bank size has increasing trend during the study period. The analysis shows that of average bank size is highest for highest for NIBL (Rs. 113.03 billion) and lowest for JBL (Rs. 32.81 billion). The analysis of structure and pattern of average loan is highest for JBL (74.11%) and lowest for SCBNL (49.02 percent). It has been found that average loan to total assets have been in increasing trend for almost all the Nepalese commercial banks in recent years.
The Pearson’s correlation coefficients matrix of the Nepalese commercial banks shows that non-interest income, equity and bank size has positive relationship with return on assets. However, HHI and loan ratio has negative relationship with return on assets. Likewise, the result shows that non-interest income, equity, bank size and loan are positively correlated to risk-adjusted return on assets. However, HHI is negatively correlated to risk-adjusted return on assets
The regression result shows equity to total assets ratio and bank size are positive and significant with return on assets at one percent level. It indicates that equity ratio and bank size have positive impact on return on assets. In the same way, the analysis reveals non-interest income are positive with return on assets. It indicates that non-interest income has positive impact on return on assets. However, HHI and loan to total assets ratio have negative impact on return on assets. Similarly, the regression analysis shows that total assets ratio is positive and significant with risk-adjusted return on assets at one percent level. It implies that bank size has negative impact on bank risk. Likewise, non-interest income is positive and significant with risk-adjusted return on assets implying that higher the non-interest income lower would be the bank risk. Similarly, the result shows that equity to total assets ratio and loan to total asset ratio have positive impact in risk-adjusted return on assets implying that higher the equity and loan lower would be the bank risk. However, the regression analysis shows that the beta coefficients HHI are negative with risk-adjusted return on assets implying that diversification (HHI) increases the bank risk.
Finally, the study concludes that bank size followed by equity to total assets is the most influencing factor that explains the profitability in Nepalese commercial banks. Similarly, bank size is the most influencing factor that explains the level of risk in Nepalese commercial banks.
Hold
Place a hold on this item
Copies
Barcode Call number Media type Location Section Status 699/D RAV Thesis/Dissertation Uniglobe Library Philosophy & Psychology Available