Non-performing Loans Research Articles

Credit risk management: An imperative for profitability of Centenary Bank Kabale Branch

Purpose: This study focuses on establishing the effect of credit risk management on the profitability of the Centenary Bank Kabale Branch. Credit Risk Management was operationalized as credit risk identification, risk assessment, and risk control, while profitability was operationalized as Return on Equity, Return on Assets, and Non-Performing Loans. Research methodology: The study population comprised of 140 respondents. A sample size of 103 respondents was obtained using the Krejcie and Morgan 1970 table for sample determination. This study adopted a mixed method approach. Quantitative data were collected using Self-Administered Questionnaires and analyzed using Pearson’s linear correlation coefficient. Qualitative data were collected through in-depth interviews and analyzed using content analysis. Results: The findings indicate that the majority of the respondents were male, aged 31–40 years, and bachelor’s degree holders. Risk identification (r=0.882), risk assessment (r=0.776), and risk controls (r=0.829) have a significant positive relationship with profitability at the central bank. Limitations: The limitations include bias from the respondents and the study being conducted in only one branch, making generalization difficult. Contribution: These investigations have informed Centenary Bank managers of the importance of credit risk identification, risk assessment, and risk control. Managers should focus on mitigation measures to reduce risks, create a credit risk assessment team to evaluate risks, establish strategies, and prioritize risk management practices by implementing policies in place. The findings contribute to the literature on credit risk management in terms of the central bank. Novelty: Previous similar research only studied how environmental accounting is implemented in a hospital and did not compare its implementation before, during, and after a pandemic.

The Impact Of Credit Risk On The Financial Performance Of Banks In Indonesia Listed On The Indonesian Stock Exchange For The Period 2018 - 2022

Banking activities collect funds from customers and distribute credit to customers in the form of loans that are added with interest for the bank's opinion. Lending activities provided by banks have risks that must be mitigated to avoid large losses and adversely affect the bank's financial performance. This study used panel data regression method with sample of 35 Indonesian Banks listed on the Indonesia Stock Exchange with the period 2018 - 2022. Referring to the main research, bank financial performance is measured by return on assets and net interest margin, while bank risk is measured by the variables non-performing loans, capital adequacy ratio, loan loss provision ratio, and cost per loan ratio, this study also added new control variables, such as bank size and leverage. The results of this study found that there is an impact between NPL with ROA, LLPR with ROA, CAR with NIM, and CPLR with NIM. While there is no impact of CAR with ROA, CPLR with ROA, NPL with NIM, and LLPR with NIM.

Analisis Pengaruh Risiko Kredit, Likuiditas, dan Efisiensi Manajemen Terhadap Profitabilitas Bank BUMN, Serta Perbandingan Kinerja Keuangan Bank Bumn dengan Bank Swasta

This research aims to identify the causes of profitability fluctuations in state-owned banks, which significantly impact Indonesia's economic growth. Understanding these risks is crucial to maintaining the stability and competitiveness of state-owned banks against private banks. This identify the influence of non-performing loans (NPL), loan-to-deposit ratio (LDR), and operational costs on operating income (BOPO) on return on assets (ROA) of state-owned banks from 2013-2022. It also compares ROA, NPL, LDR, and BOPO between state-owned and private banks. The study uses a quantitative approach, with multiple linear regression for influence analysis. Then, sample t-tests and Mann-Whitney tests for comparison analysis. It analyzes secondary data from 40 annual financial ratio observations, involving 4 state-owned and 4 private banks. Findings show in state-owned banks that NPL significant negatively impact ROA, LDR has no effect to ROA, and BOPO significant negatively impacts ROA. Together, NPL, LDR, and BOPO significantly influence ROA. Comparatively, there is no difference in ROA, LDR, and BOPO between state-owned and private banks, but there are differences in NPL.

The Influence of The Level of Credit Risk and Liquidity Risk on Profitability in Banking Listed on The Bei for the 2018-2021 Period

The type of research used is descriptive quantitative, the type of data used is secondary data obtained from financial report data, research location via the official website of the Indonesia Stock Exchange (www. Idx.id). The population and sample in this research are banking companies with a sample size of 35 banking companies listed on the Indonesia Stock Exchange for the 2018-2021 period. The research results show that Non Performing loans (NPL) have a negative and significant effect on Return On Assets (ROA) with a t-value < t-table. Loan to Deposit Ratio (LDR) has a significant effect on Return On Assets (ROA) with t-count > t-table. Simultaneous research results show that Non Performing Loans, Loan to Deposit Ratio to Return On Assets with a significant value is smaller than the standard value, the calculated f value is > f fable. The influence of the level of credit risk and liquidity risk on profitability in banks listed on the Indonesian Stock Exchange (BEI) for the 2018-2021 period is 28.2%.

Non-performing loans and their impact on the profitability of Peruvian Municipal Savings and Loan Banks

Non-performing loans and their impact on the profitability of Peruvian Municipal Savings and Loan Banks

Pengaruh Non Performing Loan Terhadap Profitabilitias Pada Perusahaan Perbankan Yang Terdaftar Di Bursa Efek Indonesia

This study aims to analyze the effect of Non Performing Loan (NPL) on profitability in banking companies listed on the Indonesia Stock Exchange. The variables of this study are: (1) Profitability as the dependent variable (Y) as measured by ROA, and (2) Non Performing Loan (NPL) as the independent variable (X) as measured by the NPL ratio. The population of this study were banking companies listed on the Indonesia Stock Exchange, totaling 47 banking companies, while the sample in this study amounted to 13 banking companies which were processed using annual data during 2020-2022, so that 39 samples were taken using purposive sampling technique. Data collection was carried out using documentation techniques. Data analysis was carried out by simple linear regression test, classical assumption test, partial test (t test), and coefficient of determination (R2). The results of this study indicate that the significance value is 0.000 <0.05, so it can be concluded that NPL (Non Performing Loan) has a negative and significant effect on profitability in banking companies listed on the Indonesia Stock Exchange.

Interplay of financial market performance, macroeconomic indicators and business sentiment: a comprehensive study of the Turkish economy

PurposeThe purpose of this study is to examine the long- and short-term relationships between the BIST100, RSC index, the EURO/TRY exchange rate, bank loans provided to the private sector, imports and exports, and nonperforming loans (NPLs) with the autoregressive distributed lag (ARDL) bound, Johansen co-integration and vector error correction model (VECM) causality tests. Political developments, pandemics, conflicts between countries, trade chains and general economic and financial problems that have frequently occurred worldwide in recent years have significantly affected the Turkish economy as well as all other countries. Türkiye's economy is intricately linked with global financial markets, and understanding the dynamics between domestic macroeconomic variables and external financial indicators can provide insights into the country's economic resilience and vulnerabilities to external shocks.Design/methodology/approachTwo distinct models are used in the analysis, with the Borsa Istanbul 100 (BIST100) Index and the Real Sector Confidence (RSC) Index serving as the dependent variables. This study examines the long- and short-term relationships between the BIST100, RSC index, the EURO/TRY exchange rate, bank loans provided to the private sector, imports and exports, and nonperforming loans (NPLs) with the ARDL bound, Johansen cointegration and VECM causality tests. The study uses monthly data spanning from December 31, 2002, to July 29, 2022, offering a comprehensive perspective on the dynamics of the Turkish economy.FindingsThe findings reveal significant long-run relationships between the BIST100 and the exchange rate, imports and exports. Short-run dynamics indicate the importance of changes in these variables, as well as NPLs and RSC, in affecting the BIST 100. The model captures the impact of economic indicators such as imports, NPLs and exports on RSC. In addition, it underscores a long-run equilibrium relationship, suggesting a responsive RSC to deviations. There is a strong positive relationship between BIST100 and the RSC. Causality tests reveal temporal relationships and causal links, with evidence of bidirectional causality for some variables, providing comprehensive insights into the short-term dynamics and adjustment mechanisms influencing RSC in the Turkish economic context.Practical implicationsAmidst global economic uncertainties and fluctuations, particularly in emerging markets such as Türkiye, understanding the relationships between financial market indicators and macroeconomic variables may help policymakers formulate effective monetary and fiscal policies aimed at stabilizing the economy, promoting sustainable growth and mitigating financial risks. In addition, these insights have practical implications for investors, regulators and other financial market participants seeking to make informed decisions in an increasingly interconnected and dynamic global economy.Originality/valueThis study uniquely examines a wide range of macroeconomic variables and financial indicators specific to Türkiye, including both traditional and nontraditional factors. This study also offers unprecedented insights into the unique characteristics and dynamics of the Turkish economy and provides valuable insights for businesses, investors and policymakers to consider Türkiye’s economic environment more effectively.

Pengaruh Net Interest Margin (NIM), Capital Adequacy Ratio (CAR), Dan Non Performing Loan (NPL) Terhadap Profitabilitas Pada Perusahaan Perbankan Yang Terdaftar Di Bursa Efek Indonesia periode 2017-2021

The role of banking in advancing the economy of a country is very large. Almost all sectors related to various financial activities always need bank services. Therefore, now and in the future we cannot be separated from the world of banking, both individually, institutionally, socially and corporately. This study aims to examine the effect of net interest margin, capital adequacy ratio, and non-performing loans on profitability in banking companies listed on the Indonesian stock exchange for the 2017-2021 period. The population in this study were 46 companies. Determination of the sample in this study using a purposive sampling technique, namely the technique of determining the sample by using certain considerations. Based on purposive sampling technique, the number of samples used in this study was 80 samples. Financial report data used in this research is quantitative with descriptive research techniques. The data analysis technique used in this study is descriptive statistical analysis, classical assumption test, multiple linear regression analysis, F statistical test, t statistical test and coefficient of determination test. The results in this study state that net interest margin has a significant positive effect on profitability, capital adequacy ratio has a significant positive effect on profitability, non-performing loans have a negative effect on profitability, and net interest margin, capital adequacy ratio, non-performing loans have a simultaneous effect on profitability.

The relation between efficiency of credit operation and non-performing loans—An application of network DEA model with undesirable outputs

To evaluate the efficiency of decision-making units, researchers continually develop models simulating the production process of organizations. This study formulates a network model integrating undesirable outputs to measure the efficiency of Vietnam’s banking industry. Employing methodologies from the data envelopment analysis (DEA) approach, the efficiency scores for these banks are subsequently computed and comparatively analyzed. The empirical results indicate that the incorporation of undesirable output variables in the efficiency evaluation model leads to significantly lower efficiency scores compared to the conventional DEA model. In practical terms, the study unveils a deterioration in the efficiency of banking operations in Vietnam during the post-Covid era, primarily attributed to deficiencies in credit risk management. These findings contribute to heightening awareness among bank managers regarding the pivotal importance of credit management activities.

THE EFFECT OF BANK-SPECIFIC AND BANK RISK ON BANK STABILITY AS MEASURED BY NPL OF THE BANGLADESHI COMMERCIAL BANK

This paper analyzed the effects of bank-specific and bank-risk drivers on bank stability as measured by non-performing loans(NPL) of commercial banks in Bangladesh from 2011 to 2021.This study used panel linear regression, and panel corrected standard error (PCSEs) to estimate the model. The main objective of the study was to analysed the effects of bank specific and bank risk on bank stability of conventional banks in Bangladesh. Capital adequacy, asset quality, income diversification, bank competition, managerial efficiency, and profitability (ROE) are used as proxies for bank-specific and liquidity risk; Sensitivity to marketing risk is used as proxies for bank risk, while control variable is used as bank size and non-performing loan (NPL) are used as a proxy for measurement of bank stability. The main results show that capital adequacy and profitability (ROE) are negative, but asset quality, income diversification, bank competition, and managerial efficiency are positively related to the NPL. The results further evaluate those determinants of bank risk, liquidity risk, and marketing risk have a positive impact on the NPL. The control variable bank size has a negative impact on the NPL. Based on our results, authorities in Bangladesh may develop rules for managing operations and ensuring bank stability as measured by NPLs.

Credit Risk Management and Financial Performance of Listed Commercial Banks in Kenya

Commercial banks are concerned with the provision of credit facilities in form of loans and advances to customers. These loans and advances are expected to be repaid by customers in line with the agreement reached with their bankers. Customers’ default in the repayment of loans and advances at the agreed period may lead to bad and doubtful debts and this can affect the financial health, profitability and going concern status of the bank. This study empirically explored the effect of credit risk management on the financial performance of nine listed commercial banks in Kenya for the period, 2018-2022. Credit risk management as the independent variable, was surrogated by two parameters- loans to deposit ratio and Non-performing Loans ratio. Return on Assets was used as a proxy for financial performance of the listed commercial banks in Kenya. The study utilized the information asymmetry theory and the theory of moral hazard and adverse selection. A correlational research design, using secondary data derived from listed commercial banks’ annual audited reports and information from Nairobi Securities Exchange was used in this study. The target population of the study was the nine listed commercial banks in Kenya. A pilot study was carried by performing the normality and multi-collinearity tests from the sample data collected for purposes of assessing the reliability and validity of the model. A census method was adopted in data collection since the target population was manageable. Collected data was analyzed using the Statistical Package for Social Sciences Version 28 where both descriptive and inferential statistical methods were used to describe and depict the results (Mean, Standard Deviation, Correlation, Regression and Analysis of variances). The findings of the study revealed a statistically significant regression effect and indicative of accomplished prediction of financial performance of the listed commercial banks through the F-calculated value which showed that the model was significant. Loan to deposit ratio explained .4% (r =.280) of financial performance of listed commercial banks in Kenya and non-performing loans ratio -36.5% (r=-.681) of financial performance of the listed commercial banks in Kenya. The study will be expected to add to the existing literature in the finance field and more importantly, the credit risk management in commercial banks and other related sectors. The study recommended that; management balance the ratio of financing between equity, debt and customer deposits to extend lending capacity, and generate high earnings volume; desist from holding capital without investing for improved financial achievement; management should maintain a moderate level of Loans and advances to deposit ratio since it is a measure of the banks’ ability to survive withdrawals, because higher rates lead to liquidity problems; give credit-risk management prominence in their strategic policies and finally, due to the continuous deterioration and accumulation of the nonperforming loans, management ought to strengthen loan recovery measures. Keywords: Credit Risk Management, Financial Performance, Listed Banks, Equity Multiplier Ratio, Capital Adequacy Ratio, Nonperforming Loans

The influence of financial knowledge on financial management behavior with locus of control and financial attitude as mediation variables

The rapid development of Financial Technology (Fintech) has had an impact on Indonesia's digital economy. Paylater has become the service people choose to meet their daily needs in addition to the increasing number of business transactions carried out electronically (ecommerce). The increase in the use of paylaters in e-commerce increases every year, accompanied by negative impacts such as impulsive buying and consumptive behavior that can befall users and heve derimental impact, especially Generation Z on the island of Java, if they do not have good Financial Management Behavior. The unique phenomenon that currently occuring is that there is an increase in the knowledge possessed but the Non Performing Loan (NPL) rate is also high. This research aims to determine the factors that influence of Financial Knowledge on Financial Management Behavior with Locus of Control and Financial Attitudes as mediation. This research is categorized as explanatory research. The respondents in this study were Generation Z e-commerce paylater users on the island of Java. The sample size in this study was determined using a purposive sampling technique with a total sample of 317 respondents. The data collection method uses a questionnaire, data is analyzed using PLS-SEM. The research results show that Financial Knowledge influences Financial Management Behavior and Locus of Control and Financial Attitudes as a psychological variable added based on Behavioral Finance partially mediate this relationship. It is hoped that beside from increasing their knowledge, ecommerce paylater users on the island of Java must have faith for what in what they can get in the future is controlled by themselves and attitudes in carrying out financial management.

Savings Growth, Loan Growth, Customer Growth, Non-Performing Loans, and Capital Adequacy Ratio on Profitability

This research intends to analyze the connection between savings growth, loan growth, customer growth, non-performing loans, and the capital adequacy ratio on profitability. The study was conducted on Village Credit Institutions (LPD) in Denpasar city during the period 2021-2022. The sample was selected using purposive sampling, resulting in a total sample of 34 LPDs (Village Credit Institutions) and 68 observations. The data obtained were analyzed using multiple linear regression analysis. The test results prove that growth in savings has a negative impact with profitability, while growth in loans and capital adequacy ratio have a positive affect with profitability. On the other hand, growth in customers and non-performing loan do not affect profitability. It is suggested to add other variables such as BOPO (Operating Expenses to Operating Income), LDR (Loans to Deposit Ratio), or asset growth.

Bank board diversity on risk and value: evidence from Taiwan

ABSTRACT This study uses the banking industry in Taiwan to investigate how board diversity affects bank’s risk and value. The results show that board gender diversity reduces bank’s risks with lower non-performing loans and financial leverage, while board ethnicity diversity also decreases non-performing loans but not leverage. Both gender diversity and ethnicity diversity improve bank value measured by Tobin’s Q. Our results are robust across different model specifications, after controlling for time-invariant unobservable bank characteristics and addressing the concerns of endogeneity and causality. We show that the gender diversity in government-held banks is more effective in managing risk and enhancing value than that of the private banks. Both gender and ethnicity diversity appear to be the Holy Grail in the Taiwanese banks as they can enhance bank value and lower bank risk. Our results provide important policy implications for the banks and regulators in Taiwan and other markets.

Spin-Off Appropriateness Assessment: Propriety Test of Sharia Business Unit Spin-Off to Increase Return on Assets

The obligation to transform a sharia business unit into a sharia commercial bank through a spin-off from its parent bank, a conventional commercial bank, must be balanced with a strategy to increase the return on assets (ROA) of Islamic Business Entities (BUS). A higher ROA ratio correlates with increased profitability. The regulatory provision mandating spin-offs, however, tends to weaken the BUS, making it difficult to compete in the national Islamic banking industry. This is because the spin-off obligation for the UUS can actually diminish its profitability performance. As Watchell has noted, while spin-offs can create differentiation from investment targets in each business, they can also lead subsidiary companies to become more focused in determining their corporate strategy and operations. This focus, however, often results in new operational strategies that increase the subsidiary's operational burden and potentially reduce profitability. Empirically, several sharia commercial banks in Indonesia have experienced a decline in the profitability of their sharia business units after spinning off into independent sharia commercial banks. This research employs normative or doctrinal juridical methods, utilizing both a statute approach and a conceptual approach. As an innovative contribution, the author proposes the Spin-Off Appropriateness Assessment as a model for evaluating the implementation of spin-offs in sharia business units. This assessment aims to increase the ROA ratio and create an investment climate that is environmentally sound. It comprises three main components: fixed capital, non-performing loan identification, and capital sources mapping.

Pengaruh Dana Pihak Ketiga (DPK), Non Performing Loan (NPL) Dan Loan To Deposit Ratio (LDR) Terhadap Penyaluran Kredit (Pada PT. Bank Perkreditan Rakyat di Kabupaten Bogor Periode 2018-2022)

The aim of this research is to determine the influence of Third Party Funds (DPK), Non-Performing Loans (NPL), and Loan to Deposit Ratio (LDR) on partial and simultaneous credit distribution at PT Bank Perkreditan Rakyat in Bogor Regency for the 2018-2022 period. and To find out how much contribution Third Party Funds (DPK), Non Performing Loans (NPL), and Loan to Deposit Ratio (LDR) have made to partial and simultaneous credit distribution at PT Bank Perkreditan Rakyat in Bogor Regency for the 2018-2022 period. This research uses a quantitative research design with a causal relationship approach. In this research, credit distribution is the dependent variable. Meanwhile, the independent variables in this research are Third Party Funds (DPK), Non-Performing Loans (NPL), and Loan to Deposit Ratio (LDR). The research results show that based on the calculation of the coefficient of determination (R Square), a value of 0.887 is obtained. This result means that there is a contribution of 88.7% from the independent variables Third Party Funds (DPK), Non Performing Loans (NPL), and Loan to Deposit Ratio (LDR) to credit distribution at PT Bank Perkreditan Rakyat in Bogor Regency for the 2018 period. -2022.

The Effect of ESG Performance on Bank Liquidity Risk

In recent years, investors have increasingly focused on the environmental, social, and governance (ESG) performance of businesses, driven by the rising importance of social and environmental challenges. This trend highlights the critical role of ESG factors in the financial sector. This study leverages stakeholder theory, risk management theory, and ESG investment theory, utilising financial data and ESG scores from Chinese listed banks to comprehensively analyse ESG elements and examine their impact on the liquidity risk of commercial banks. The results show that: (1) Enhanced ESG performance can mitigate liquidity risk in commercial banks by reducing the proportion of non-performing loans and improving overall financial performance. (2) By standardising and implementing sustainable business practices, ESG elements can improve commercial banks’ liquidity management levels and lessen the incidence and effects of liquidity risk. As a result, it is critical to lower banks’ liquidity risk and support the long-term growth of commercial banks from five angles: information disclosure, differentiated reform, digital transformation, education and training, and international cooperation.

Manifestations of loan growth – profitability and non-performing loans – a study of the Indian banking sector

PurposeAfter half a decade of balance sheet clean-up prompted by the Reserve Bank of India’s (RBI) asset quality review (AQR), Indian banks are back on track for increased loan growth. Being a financial vehicle for the economy, loan growth cannot be put on hold for a long period of time. But it is also important to understand that loan growth carries an inherent risk of default. A trade-off exists between loan growth, non-performing loans (NPLs) and bank profitability. Our study highlights the importance of understanding this relationship.Design/methodology/approachFor our study, we have taken a sample of India’s private and public sector banks. The dataset consists of the financials of our sample for the period 2006–2021. Two-step differenced generalized method of moments (SYS-GMM) estimation has been used to establish the relationship. The mediating role of NPLs in the relationship between loan growth and profitability is examined by the mediation analysis using structural equation modeling (SEM) and the Sobel test. We have used Stata 16.1 for the analysis of our dataset.FindingsThe findings of our study suggest that bank lending is a major contributor to the bank’s earnings. Loan growth after a certain point has a negative impact on profitability, and it also adds to the NPLs of the bank. The study result indicates that moderate loan growth is key to steady and stable growth in the Indian banking industry.Practical implicationsOur study is directed toward understanding the positive and negative manifestations of loan growth. We develop a framework to understand this relationship and then empirically prove it. The study is beneficial for employees and policymakers alike to minimize the negative impact of loan growth.Originality/valueThe issue of the simultaneous impact of loan growth on NPLs and profitability has not been studied in the Indian banking sector. Also, this study adds to the present literature by studying the mediation effect of the NPLs on the loan growth and profitability relationship.

Climate risk and financial stability: Assessing non-performing loans in Chinese banks

Climate change poses significant challenges across various sectors, particularly within the financial realm, where the stability of banking systems is paramount. Non-performing loans (NPLs), as critical indicators of financial health, may be considerably influenced by climatic factors. This study delves into the impact of climate change on NPLs within the Chinese banking sector from 2010 to 2022, focusing on the influence of greenhouse gas (GHG) emissions. Utilising a comprehensive dataset and advanced econometric models (including panel quantile regression, sensitivity analysis and balanced panel data models), this research illuminates the intricate relationship between environmental changes and financial health. The research also discovers a significant climate change impact on NPLs, with increased GHG emissions leading to varied responses among banks. This variation reflects the different risk profiles and adaptive capacities of banks to climate-related financial risks. Banks demonstrating higher adaptability to climate change exhibit lower NPL ratios, underscoring the importance of strategic risk management and proactive adaptation in the banking sector. The research significantly advances the understanding of the financial implications of climate change and the interplay of climate variables with financial stability. It offers crucial insights for policy makers and banking institutions, emphasising the need to integrate climate risk into financial decision making and develop robust climate-resilient strategies for the banking sector's protection. In conclusion, the study enriches the discourse on the financial impacts of climate change and serves as an informative guide for stakeholders in navigating and addressing these emerging challenges. It underscores the necessity of embedding environmental considerations within banking practices to promote a resilient and sustainable financial system in the face of environmental uncertainties.

PENGARUH PROFITABILITAS, ASSET QUALITY, CAPITAL STRUCTURE DAN MARKET RESPONSE TERHADAP KOMPENSASI EKSEKUTIF SEKTOR PERBANKAN YANG TERDAFTAR DI BURSA EFEK INDONESIA TAHUN 2015-2019

The purpose of this research is to determine the impact of profitability, asset quality,capital structure and market response on executive compensation of 33 banks sector in Indonesia Stock Exchange period 2015 -2019. Financial Performance of banks used in this study is Profitability measured by Return On Asset (ROA), Asset quality measured by Non Performing Loan (NPL), capital structure measured by Capital Adequacy Ratio (CAR), and Market Response measured by Price Earning Ratio (PER). The result of this study showed that Profitability (ROA) has a positive significant to executive compensation, Asset quality (NPL) and Capital structure (CAR) has no significant effect on executive compensation. While market response (PER) has a negative significant to executive compensation.