Impact of asset quality on bank profitability: Case study

Kasavica, Petar; Jović, Zoran

doi:10.5937/industrija43-9219

Cited by 6 publications

(8 citation statements)

References 13 publications

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“…This equation and close versions are used also by Ozurumba (2016), Ugoani (2016), Adebisi and Matthew (2015), Bhattarai (2016), Etale et al (2016), Lata (2014), Afiriyie and Akotey (2013) and Bace (2016). Likewise, by searching non-performing loans as the determinants of bank profitability under their studies, more extensive forms of the below stated equation is used (Buchory, 2015;Duraj & Moci, 2015;Güneş, 2015;Kasavica & Jović, 2015;Khan, Anuar, Choo, & Khan, 2011;Ozgur & Gorus;Samırkaş et al;Sarıtaş et al;Taşkın, 2011) , = + 1 2 , + 2 2 , + 3 2 , + ,…”

Section: Methodsmentioning

confidence: 99%

Effect of the Asset Quality on the Bank Profitability

Kadioglu¹,

Telceken²,

Ocal³

2017

IJEF

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This study investigates whether non-performing loans effect the bank's profitability in Turkey. The study applies a panel regression method to the quarterly data set including 1809 observation belongs to 55 Banks in Turkey during the period from 1 st quarter of 2005 to 3 rd quarter of 2016. It is found that there is a significant, negative relationship between non-performing loans and bank profitability which is measured by return on equity and return on asset. The higher non-performing loans, the lower asset quality, leads to the lower return on equity and return on asset, and the lower non-performing loans, the higher asset quality, leads to the higher return on equity and return on asset.

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Section: Methodsmentioning

confidence: 99%

Effect of the Asset Quality on the Bank Profitability

Kadioglu¹,

Telceken²,

Ocal³

2017

IJEF

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“…There are plenty of researches measuring the impact of asset quality on bank profitability (for example -Kasavica, Jović, 2015). However, in the relevant literatures it is not developed a model designed to determine the effects of of implementation SEPA rules on the performance of the banking sector.…”

Section: Sepa-compatible Instruments -Efficiency Measures Of the Implmentioning

confidence: 99%

Impact of the single euro payment area on performance of banking sector

Todorović¹,

Sedlarević²,

Tomić³

2017

Industrija

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“…The study found that net interest margin does reflect a premium to compensate for the risk of loan default (Kasavica & Jovic, 2015). In addition, the study showed that large banks had higher sensitivity to the risk of default than smaller banks (Kasavica & Jovic, 2015).…”

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confidence: 93%

“…Typically, riskier loans carry higher interest rates along with a higher provision for default than high quality loans. A study by Kasavica and Jovic (2015) examined whether banks with a risky loan portfolio specifically selected higher interest rates on those loans to achieve a higher net interest margin and compensate for the loan portfolio risk. The study found that net interest margin does reflect a premium to compensate for the risk of loan default (Kasavica & Jovic, 2015).…”

mentioning

confidence: 99%

“…A study by Kasavica and Jovic (2015) examined whether banks with a risky loan portfolio specifically selected higher interest rates on those loans to achieve a higher net interest margin and compensate for the loan portfolio risk. The study found that net interest margin does reflect a premium to compensate for the risk of loan default (Kasavica & Jovic, 2015). In addition, the study showed that large banks had higher sensitivity to the risk of default than smaller banks (Kasavica & Jovic, 2015).…”

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confidence: 99%

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Impact of Non-Performing Loans on Smaller Us Bank Profitability and Value in the Post-Crisis Period

Skorburg

Shenai

2021

JEE

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Credit quality is an important constituent of a bank’s asset portfolio. Asset quality and inadequate capital reserves were two significant triggers of the Global Financial Crisis (GFC) in 2009. Since then, there has been substantial regulatory and internal risk management changes within the US banking industry. There are no previous specific studies on smaller US banks. This study reviews the empirical literature on the topic of asset quality, bank profitability and market value along with statistics specific to the US banking industry. The impact on profitability is assessed through the return on equity ratio (ROE) and the impact on market value is assessed through the market to book ratio (MTBR). Along with the non-performing loan ratio (NPL), three other CAMEL ratios were also used as independent variables: capital adequacy (TRWCA), liquidity (LIQ) and management efficiency (MAN) to assess their impact on profitability and market value. Panel data has been collected for fifteen smaller US banks and the Generalised Method of Moments (GMM) of estimation is used robustly to estimate the effects of CAMEL ratios on bank profitability and market value. The link between NPL and other ratios on bank profitability and market value in smaller US banks has been assessed. The importance of the NPL ratio for bank profitability and market value is once again confirmed.

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Impact of asset quality on bank profitability: Case study

Abstract: The paper explores the impact of asset quality on banks' profitability in the case of a commercial bank in Serbia. Parameters covered as key indicators of the impact on profitability are: maturity of the portfolio, clients ' ratings, NPL (Non-Performing)

Cited by 6 publications

References 13 publications

Effect of the Asset Quality on the Bank Profitability

Effect of the Asset Quality on the Bank Profitability

Impact of the single euro payment area on performance of banking sector

Impact of Non-Performing Loans on Smaller Us Bank Profitability and Value in the Post-Crisis Period

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