Impact Of Non-performing Loans Research Articles

THE IMPACT OF NON-PERFORMING LOANS AND THE BI RATE ON RETURN ON ASSETS

The increase in interest rates also brings changes in the management of funding sources and distribution of funds (credit). Changes in interest rates of course not only affect the profits generated by banks, but also how banks manage the interest income earned and interest paid. This research aims to determine the effect of non-performing loans (NPL) and the Bank Indonesia Interest Rate (BI Rate) on Return on Assets (ROA). The sample used in this research is state-owned banks listed on the Indonesian Stock Exchange (BEI) for the period 2020-2022. The research method used is an associative method with a quantitive approach. The data analysis technique used is multiple linear regression. The research results show that Non Performing Loans (NPL) have a negative and significant influence on Return on Assets (ROA) and the BI Rate has a negative and insignificant influence on Return on Assets (ROA).

The impact of non-performing loans on systematic risk of banks. Evidence from the European market

The impact of non-performing loans on systematic risk of banks. Evidence from the European market

Pengaruh Dana Pihak Ketiga Dan Non Performing Loan Terhadap Profitabilitas Perbankan Dengan Rasio Intermediasi Makroprudensial Sebagai Variabel Intervening

The purpose of this study is to investigate the impact of third party funds and non-performing loans on banking profitability by correlating Return on Assets with the macroprudential intermediation ratio as the mediating variable. This study uses information got from the yearly reports of banks recorded on the IDX with a sampling technique utilizing purposive sampling. The research period was taken for 5 years with the number of sample data used as many as 120 data from 24 banking sub-sector entities. The research method uses Partial Least Square (PLS) with secondary data types. The results of the research show that there is a positive impact of third party funds on the macroprudential intermediation ratio and there is no impact of non-performing loans on the macroprudential intermediation ratio, there is a partial negative impact of third party funds and non-performing loans on profitability, and there is a positive influence on the macroprudential intermediation ratio on profitability. Macroprudential intermediation ratio can mediate third party funds to profitability. However, the macroprudential intermediation ratio cannot mediate non-performing loans on profitability.

Impact of Non-Performing Loans on Saudi Bank Profitability

Non-performing loans (NPLs) have become increasingly worrying to the Saudi banking sector. Sanctioned loans have a repayment schedule, including principal and interest amounts. Excessive defaults on loans leads to a liquidity crisis throughout the banking sector, and can even cause bank failure. As a result, banks have to cover non-performing loans and maintain reserves under the instructions of the Saudi Arabia Central Bank, which severely affects profitability. This study analyzes the comparative position of non-performing loans in the Saudi banking sector over the period 2009-2017 to determine causes and impacts on bank profitability, using data from annual reports. The study variables are profitability (ROA and ROE) as the dependent variable, and non-performing loans ratio (NPLR) as the independent variable. The data was analyzed by correlation, regression, and analysis of variance (ANOVA) using SPSS. The empirical results represent that NBLR has a negative influence on the dependent variable.

The Impact of Non-performing Loans on Nigerian Economic Growth, 2011-2020

This paper examined the impact of rising non-performing loans (NPL) on Nigeria's economic growth using time series data from 2011 – to 2020. In analyzing this relationship, the co-integrated autoregressive distributed lag (ARDL) model was employed, and the study revealed a long-run negative relationship between NPL and economic growth. This suggests that a higher NPL may have reduced the banks' loan disbursement capacity or made the banks reluctant to give out more loans to the productive sector, adversely affecting the economy. This research also supports the long-standing results of a positive relationship between money supply and economic growth. It further revealed a positive relationship between government expenditure and economic growth in Nigeria. Therefore, the study recommended that Nigeria's financial management team activities include a dedicated watch on the rising NPL in the banking industry. Furthermore, monitoring NPL should no longer be viewed as the sole responsibility of the CBN but that of all managers of the Nigerian economy.

The Impact of Non-Performing Loans and Economic Shock on The Stability of Islamic Banking Performance as Moderating Variable in The COVID-19 Pandemic Era

This study aims to determine the effect of non-performing loans and economic shock as an intervening variable on loanable supply and loanable demand in Islamic banks which have an impact on the stability of the performance of Islamic banks in the Pandemic era. The research period is monthly with the research period from June 2019 – June 2021 using behavioral data analysis. We use secondary data from the Indonesian financial services authority. We investigated the data using linear and non-linear analysis to investigate the influence of loanable supply and loanable demand on the performance of Islamic banks in normal times or in a stable economy and the occurrence of economic shocks. From the results of our investigation, we found that non-performing loans have a significant impact on loan supply and loan demand in influencing the stability of the performance of Islamic banks in the era of the COVID-19 pandemic. Performance shocks in Islamic banks in the pandemic era are not only due to economic shocks but also due to non-performing loans from Islamic bank customers who are unable or have difficulty completing their obligations to Islamic banks.

Analysis of Nonperforming Debts' Impact on Profitability and Liquidity of Some Iraqi Commercial Banks for the Period between 2011-2018

In the banking world, the non-performing debts are considering one of the main critical that have almost all commercial banks attention. Hence, this study aimed to know the impact of non-performing loans on profitability and liquidity of commercial banks, where it has found a fundamental impact on its various profitability activities such as return on equity assets. The study was conducted on a group of the Iraqi commercial banks, 10 banks, for the period (2011-2018), and panel data models were used to analyze and demonstrate the impact of non-performing bank loans on profitability, return on equity (shareholders ’equity), and return on assets. In return, the study did not find such an impact of liquidity size because it determines by monetary authority represented by Central Bank of Iraq (CBI) and it related significantly to loans, the higher the proportion of loans the greater the proportion of its reserves.

Impact of Non-Performing Loans on Bank s Profitability: Empirical Evidence from Commercial Banks in Kosovo

Impact of Non-Performing Loans on Bank s Profitability: Empirical Evidence from Commercial Banks in Kosovo

An empirical analysis on the impact of non-performing loans on investment and economic growth and the role of political governance

Objective: To empirically analyze the link between nonperforming loans and investments along with the role of political governance. The estimation technique used is the fixed effects model including both the country and timMethods: e fixed effects. The dataset consists a panel of 103 countries with annual data over the period from 2000 to 2017. A unique composite political governance index has been prepared combining the six existing governance indicators via Principal Component Analysis (PCA). Findings: It is found that NPL has significant negative impact whereas, governance has significant positive impact on investments as per expectations. However, it is found that the negative impact of NPL on investment gets stronger in presence of good governance. This is a paradoxical result and further attempts has been made to rationalize the outcome. Applications: The study empirically proves the theory of negative impacts of NPL on investment in the economy. Furthermore, the role of political governance has been scrutinized. No prior works have been carried out on this topic. The paradoxical result in this study has opened up new areas for research. An extensive literature review has been provided along with a detailed discussion on the possible measures to tackle with the problems. JEL Classification: C3, E6, G0. Keywords: NPL; investment; political governance institutions; fixed effects model; composite political governance index

The impact of non-performing loans on bank lending in Europe: An empirical analysis

In the aftermath of the global financial crisis, considerable attention has been paid to the accumulation of non-performing loans in the balance sheet of European banks and to its potential negative effects on bank lending to the real economy. Using a dataset composed of bank-specific information and country aggregates, we study the impact of the stock and the flow of non-performing loans on the lending activities of a sample of 75 European banks between 2014 and 2018. In general, higher rates of non-performing loans, together with other variables, are associated with lower growth rates of performing loans. This effect persists across several econometric specifications and is more significant for those banks exhibiting lower growth rates of performing loans. Similarly, our econometric analysis suggests that banks with higher decreases in their rate of non-performing loans tend to lend more to the real economy, an effect which is particularly intense at the right tail of the distribution. The findings of our paper can be useful for policymakers when addressing the resolution of non-performing loans in banks.

The Impact of Non-Performing Loans on the Profitability of Listed Euro-Mediterranean Commercial Banks*

This paper is based on the unpublished Thesis by Psaila, A. (2019) “The Impact of Non Performing Loans on the profitability of listed Euro-Mediterranean commercial banks” supervised by Dr. S. Grima. An earlier version of this article has been presented in ICABE 2019 www.icabe.gr

Impact of non-performing loans on financial performance: A case of Sri Lankan listed commercial banks

The purpose of this investigation is to extend earlier research on the impact of Non- Performing Loans on financial performance. The study confines only nine listed commercial banks in Sri Lanka through the purposive sampling due to the minimize of missing data and links secondary data derived from the annual financial reports of commercial banks using the CSE’s database. The analysed non-performing loans indicator include non-performing loan ratio while financial performance indicator incudes return on assets, return on equity. Regression and Correlation analysis have been employed for the study to investigate the effects of non-performing loans on financial performance. The results of the analysis have revealed that attribute of Non- Performing Loans which is Non-Performing Loan ratio have a negative and significant impact on Financial Performance. The prominent finding of the research utterly reveals that, non-performing loans significantly influences the financial performance of listed commercial banks in Sri Lanka with the negative relationship. Based on the Finding, researcher recommends banks to devise new strategies and implement effective policies relating with management of non-performing loans to improve their financial viability as non-performing loans is one of the significant factors that determine the financial performance which this study concluded. Thus this study will be useful for the management personnel of banks to create the ideas for protect banks from crisis and enhance the performance of banks.

Analysis of Non-Performing Loans (NPL) among Microfinance Institutions (MFIs) in Ghana: Evidence from the Kasoa Municipality

The contributions of Micro-Finance Institutions (MFIs) to the Ghanaian economy can never be overemphasised. However, most of these institutions are faced with various challenges including non-payment of loans which constantly affect their operations and subsequently survival. As such, the study hinged on determining the non-performing loan (NPL) situations of Micro-Finance Institutions (MFIs) in Ghana focusing on four firms within the Kasoa metropolis, Central Region. The principal objective of the study was to determine the non-performing loan situations of 4 MFIs. The study adopted the both quantitative and qualitative approach and obtained a sample from 10 MFIs using the convenient (haphazard) sampling technique. The respondents comprised a branch manager, an executive director and two credit managers from each MFI. The data gathered were analysed using descriptive tools such as frequency table, bar charts and pie chart. The data was also analysed using narrations. Primary data collection instruments, specifically questionnaires were employed to gather data from the respondents. The study revealed the categories of loans existing in MFIs as well as those usually applied for, the factors accounting for non-performing loans, management of non-performing loans, sources of incomes and profits, impact of NPL on firms’ operations. The study concluded that NPLs is a challenge for MFIs especially those in Kasoa metropolis. Recommendations made were that, The MFIs should make conscious efforts to pursue the implementation of the existing safeguards as it will help address the NPL situation, Clients granted loans should be monitored to ensure that loans are used for intended purposes, Training programs should be organised to adequately equip staff that engage in granting and recovery of loans, There should be good client profiling to identify the economic conditions of clients, this will aid the charging of appropriate interest rate that will enhance loan repayment.

The impact of non-performing loans on households on the financial performance of banks in Macedonia

The credit portfolio in banks with the traditional model of banking hasdominant role in the banks’ operations and. Loan portfolio quality it is the main generator of the banks’ results. The basic indicator for quality of the credit portfolio is the share of non-performing loans to total credit portfolio. Very often, the NPL loans are also a source of other risks, as liquidity risk and solvencyand increase the risk profile of the bank.This paper investigates the influence of the non-performing ratio on houseeholds on the financial performance ofbanking system in the Republic of Macedonia for the period 2010-2017. The analysis presents correlation and regression between non-performing loan ratio on housholds and profitability indicators: rate of return on assets and rate of return on equity, as well as the capital adequacy.The results of correlation shows a moderately high, negative correlation between the non-performing loans ratio and rates of return on equity and return on assets. Regression analysis shows that increasing the non-performing loans ratio has influence to reduce the bank profitability. KEY WORDS: non-performing loans, banks, credit portfolio, profitability, capital adequacy

Impact of non-performing loans on US product and labor markets

PurposeUsing time-series data on the US banking industry for the period 1984Q1-2016Q2, the present study aims to examine the impact of both aggregate and sector-specific non-performing loans (NPLs) on aggregate and sectoral product and labor markets.Design/methodology/approachUsing both single equation ordinary least squares and instrumental variables regressions, the study compares the sensitivity of sector-specific gross domestic product (GDP) and employment growth to changes in both aggregate and sectoral NPLs. Moreover, the paper uses vector autoregressions (VARs) to dynamically trace the impact and duration of NPLs on different types of real economic activity..FindingsRise in total NPLs reduces US real GDP growth that is most accentuated for construction sector GDP. Likewise, total NPLs significantly lowers both total and non-farm employment growth, financial activities and construction sector employment growth, with the latter showing most sensitivity. Moreover, NPLs in commercial and industrial sector, consumer lending, non-farm non-residential, construction and land development, single- and multi-family residential sectors reduce corresponding sectoral employment growth. The VARs largely confirm these findings with shocks to total NPLs having the most immediate and persistent inimical impact on construction-sector GDP growth.Practical implicationsThe deleterious impact of different categories of NPLs on both aggregate as well as sector-specific product and labor markets illustrate that a distressed banking sector is a serious obstacle to the real sector. The findings underscore the need not only to clean up NPLs for the sake of banks financial soundness but also to reduce their pernicious effects on the health of the US economy. For bank regulatory authorities in the USA, it indicates constant monitoring of banks in their jurisdiction and identifying early warning signals to mitigate the potential real sector losses due to rising NPLs.Originality valueThe extant literature on NPLs has mainly focused on explaining its underlying determinants but not on its real sector consequences. The present paper examines the impact of NPLs on different facets of real economic activity, an issue that has been rarely studied and especially not on the US economy. Moreover, the overwhelming majority of existing literature focuses on aggregate NPLs. The relationships derived in such studies, while useful, can mask important differences between different types of NPLs and real economic activity. The present paper explores the impact of disaggregated NPLs in the US banking industry on corresponding sector-specific product and labor markets, again an issue that has not been studied previously.

The impact of non-performing loans on bank profitability and lending behavior:Evidence from Vietnam

The impact of non-performing loans on bank profitability and lending behavior:Evidence from Vietnam

The Impact of Non-Performing Loans on Firm Profitability: A Focus on the Nigerian Banking Industry

The Impact of Non-Performing Loans on Firm Profitability: A Focus on the Nigerian Banking Industry

Nonperforming loans and bank profitability: evidence from an emerging market

PurposeThe purpose of this paper is to investigate the bank-specific and macroeconomic determinants of nonperforming loans (NPLs) as well as the impact of NPLs on bank profitability.Design/methodology/approachUsing a sample of 22 Ghanaian banks over the period 2005-2010, the study employs a fixed effect panel model in estimating three different empirical models.FindingsThe study finds new evidence of bank-specific factors as well as macroeconomic factors determining NPLs. Inflation and industry concentration are not significant in determining NPLs, although both are positively related to NPLs.Practical implicationsThe findings of this study have important implications for policy makers and bank managers.Originality/valueThe paper offers significant value in shaping and improving the banking sector of emerging markets.

The Impact of Non-performing Loans on Bank Lending Behavior: Evidence from the Italian Banking Sector

The aim of this study is to understand the bank lending behavior during financial crisis, in particular whether an increase of credit risk during this period can lead banks to reduce their lending activity. A second object is to investigate whether cooperative and commercial banks show different behaviors. The analysis is based on a sample of Italian banks (listed and no listed), an example of a country undergoing a credit crunch. The sample consists of 488 listed and unlisted Italian banks observed 2007-2013. Unlisted banks are included because they are the most numerous in the Italian banking system. Findings show a negative impact of credit risk on bank lending behavior, with regard to both credit risk measures: the nonperforming loans and the loan loss provision ratio.

Efficiency and Risk in Commercial Banks – Hybrid DEA Estimation

The hybrid DEA model can solve the difference between radial inputs and non-radial inputs and evaluate efficiency. This is a pioneering study that uses the hybrid DEA model, evaluating the proportionate inputs with a radial measure and the non-proportionate inputs with a non-radial measure, in order to examine the impact of non-performing loans (NPLs) on the efficiency of Taiwan's banking sector from 2006 to 2010. In summary, this research demonstrates the following: (1) Only nine banks remained in the top efficiency list during these years: China Development Industrial Bank, Mega International Commercial Bank, Chinatrust Commercial Bank, Cathay United Bank, Bank of Kaohsiung, Industrial Bank of Taiwan, Taiwan Cooperative Bank, Land Bank, and Bank of Taiwan. (2) Risk is an important factor that should be taken into consideration when evaluating banking efficiency. (3) From the hybrid DEA model, we find that most of the inefficient banks have an inefficiency factor caused primarily by too many NPLs (risk). (4) The efficiency of Taiwan's large-scale banks is significantly better than the small-scale bank. By looking at the inefficiency index, the large-scale bank's inefficiency is caused by NPLs. For the small-scale bank, both radial variables and non-radial variables have equal importance in improving its efficiency.