Economics, Econometrics and Finance
3 years ago

Credit risk negatively impacts Bangladesh banks' profitability, hindering economic progress.

International Journal of Banking Risk and Insurance
Analyzing How Credit Risk Influences the Performance of Commercial Banks in Bangladesh: A Quantile Regression Modeling
Mohammad Nazrul Islam, Arifa Akter, Mohammad Jahangir Alam, A. H. M. Shahriar

Paper Summary

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Commercial banks in Bangladesh are facing challenges due to credit risk, affecting the country's economic progress. A study analyzed how credit risk indicators impact bank profitability. Loan Loss Provision to NPL ratio and Cost per Loan ratio positively affect Return on Assets, while Capital Adequacy ratio and Leverage ratio have a negative impact. Other indicators like Non-Performing Loan ratio and Total Loan to Total Asset have no significant impact. Overall, credit risk significantly reduces bank profitability, suggesting the need for better risk assessment to improve profitability.