Factors Affecting Non-Performing Loans in State-Owned Banking

Harimurti, Cundo; Pandoyo, Pandoyo; Sofyan, Mohammad

doi:10.29040/ijebar.v6i2.5273

Cited by 2 publications

(1 citation statement)

References 4 publications

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“…A plethora of studies exists in the extant literature concerning the nexus of credit risk management and bank financial performance. For example, Cundo, Pandoyo and Mohammad (2022) examine the effects of macroeconomic factors, including inflation projections, and bank-specific characteristics, such as return on asset, equity to asset ratio, and bank size. Panel data regression analysis was used to analyze the data of the study employing the E-Views Version 10 software package.…”

Section: Empirical Reviewmentioning

confidence: 99%

Non-performing Loans and Deposit Money Banks’ Financial Performance: Empirical Evidence from Nigeria

Ughulu¹,

Inobemhe²,

Ughulu³

2023

JEPF

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Nigeria’s deposit money banks (DMBs) are financial institutions licensed by the Central Bank of Nigeria to mobilize demand and saving deposits from the surplus economic units for on-lending to the deficit economic units for investment and consumption purposes. In carrying out this intermediation function, DMBs are exposed to several risks including credit risk, market risk, interest rate risk, exchange rate risk, and others. Of these risks, the credit risk seems the most harmful to DMBs’ financial performance as its occurrence can easily and quickly send a bank into distress or outright liquidation. For over a decade now, DMBs in the country have been experiencing continuously increasing nonperforming loans portfolios. This type of scenario had led to poor financial performance among the Banks. It is for this reason that the present study seeks to verify empirically the impact of certain financial and macroeconomic variables on DMBs’ financial performance for the period 2001 to 2021, that is, 21 years. In doing this, we dissected financial performance into return on assets and return on equity. Hence, two separate models were specified in the study with return on asset and return on equity serving as the dependent variables in each of the models, while non-performing loans, loan-loss provisions, lending rate, bank size, monetary policy rate and inflation rate represented the independent variables. The longitudinal research design was adopted since the study’s data covered a specific timeframe. The fully modified ordinary least squares and the panel data regression techniques were used to analyze the data. The findings of the study revealed, among others, that non-performing loans exerted a negative impact on the financial performance of the DMBs in terms of return on assets and return on equity. It was, therefore, recommended that provisions for loan losses, even though appeared with positive impact on return assets and return on equity, should to be scaled up as the variable is frequently used as a strategic and effective means for mitigating loans losses and, invariably, the financial performance of the DMBs.

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Section: Empirical Reviewmentioning

confidence: 99%

Non-performing Loans and Deposit Money Banks’ Financial Performance: Empirical Evidence from Nigeria

Ughulu¹,

Inobemhe²,

Ughulu³

2023

JEPF

View full text Add to dashboard Cite

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Exploring the Drivers of Bank Risk in State-Owned Commercial Banks

Bhowmik,

Sarker,

Sharif

2024

IJFBS

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This paper investigates the factors that form bank risks in Bangladeshi state-owned banks. As a representation of bank risk, non-performing loans have been considered the dependent variable for this study. The relevant data have been extracted from six state-owned banks in Bangladesh from 2013 to 2022. The final dataset consists of 60 firm-year observations. The ordinary least square (OLS) regression with robust standard errors model is utilized to find the relationship of bank risks with determinants like asset size, efficiency, liquidity, profitability, leverage ratio, capital adequacy ratio, and loan to asset ratio. The findings say that bank size and loan-to-asset ratio have a highly significant positive relationship with bank risk, whereas profitability, capital adequacy ratio, and bank efficiency have a significant negative association with bank risk. On the other hand, leverage and liquidity are negatively and positively correlated with no statistical significance. To check the study's robustness, another proxy of bank risk, loan loss provision has been used and the results are almost similar. State-owned banks operate in every economy with a different mindset than the general commercial banks. Hence, policymakers should take necessary initiatives based on this study to bring down the high bank risks in state-owned banks in Bangladesh.

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Factors Affecting Non-Performing Loans in State-Owned Banking

Cited by 2 publications

References 4 publications

Non-performing Loans and Deposit Money Banks’ Financial Performance: Empirical Evidence from Nigeria

Non-performing Loans and Deposit Money Banks’ Financial Performance: Empirical Evidence from Nigeria

Exploring the Drivers of Bank Risk in State-Owned Commercial Banks

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