The Impact of Credit Risk on the Financial Performance of Commercial Banks in Bangladesh

Abstract

This report is centered on The Impact of Credit Risk Management on the Financial Performance of Commercial Banks in Bangladesh. The banking sector of Bangladesh is mixed with nationalized, private and foreign commercial banks. Numerous efforts have been made to explain the impact of credit risk management on the financial performance of these banks. To understand these banks performance, the relationships between the independent variables Return on Asset (ROA), Return on Equity (ROE), Capital Adequacy Ratio (CAR), Cost per Loan Asset (CLA), Non-Performing Loan Ratio (NPLR), Loan Loss Provision Ratio (LLPR) and Leverage Ratio (LEVR) are essential to be identified so that analysts can get the factual banking performance of the banking sector. Evaluation of the commercial banks performance is specifically significant these days due to strong competition. The banking sector over the past two decades has endured a significant shift. It grow into an imperative that banks are under pressure by internal and external influences and prove profitable.

The following project report has been created with the support of seven diverse variables on the past six financial performance years (2013-2018) condition of the specified twenty-three (23) commercial banks and is comprises of five chapters. The first chapter refers to the introduction part of the Project. The second chapter is the review of the literature that will help any reader who reads the report may get the appropriate indulgences of the financial terms used in the report. The third chapter is the methodology which articulates around the different analysis methods and the variables used in the project. The fourth chapter describes about the analysis and findings of the report where twenty-three (23) of highly reputed commercial Banks in Bangladesh are being analyzed through the seven independent variables stated above. The final chapter will carry the conclusion and some recommendations so that might help in the evolvement of all the commercial banks financial condition. Loan loss provision ratio and Non-performing loans ratio effects on the commercial banks profitability.