The Effect of Credit Risk on the Banking Profitability: A Case on Bangladesh

The Effect of Credit Risk on the Banking Profitability: A Case on Bangladesh

Abu Hanifa Md. Noman

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Sajeda Pervin

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Mustofa Manir Chowdhury

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Hasanul Banna

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International Islamic University Chittagong

The Effect of Credit Risk on the Banking Profitability: A Case on Bangladesh

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Abstract

The study aims to find the effect of credit risk on profitability of the banking sectors of Bangladesh. The study uses an unbalanced panel data and 172 observations from 18 private commercial banks from 2003 to 2013. The study uses NPLGL, LLRGL, LLRNPL and CAR as credit risk indicators and ROAA and ROAE and NIM as profitability indicators. Using OLS random effect model, GLS and system GMM the study finds a robust negative and significant effect of NPLGL, LLRGL on all profitability indicators. The analysis also finds a negative and significant effect of CAR on ROAE. As an additional analysis, the results reveal that the effect of the implementation of Basel II is significantly positive on NIM but significantly negative on ROAE. The analysis reveals some significant policy implications for increasing profitability and protecting banks from crisis.

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37 Cites in Article

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Funding

No external funding was declared for this work.

Conflict of Interest

The authors declare no conflict of interest.

Ethical Approval

No ethics committee approval was required for this article type.

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Not applicable for this article.

How to Cite This Article

Abu Hanifa Md. Noman. 2015. \u201cThe Effect of Credit Risk on the Banking Profitability: A Case on Bangladesh\u201d. Global Journal of Management and Business Research - C: Finance GJMBR-C Volume 15 (GJMBR Volume 15 Issue C3).

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GJMBR Volume 15 Issue C3

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Journal Specifications

Crossref Journal DOI 10.17406/GJMBR

Print ISSN 0975-5853

e-ISSN 2249-4588

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Classification

GJMBR-C Classification JEL Code: H81

Submission ReceivedFebruary 3, 2015
Peer Review Double Blind
Handling Editor
Accepted March 2, 2015
Published March 15, 2015

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v1.2

Issue date

April 22, 2015

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Article Matrices

Total Score: 104

Country: Bangladesh

Subject: Global Journal of Management and Business Research - C: Finance

Authors: Abu Hanifa Md. Noman, Sajeda Pervin, Mustofa Manir Chowdhury, Hasanul Banna (PhD/Dr. count: 0)

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Publish Date: 2015 04, Wed

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Total Views: 4158

Total Downloads: 2275

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