The Effect of Credit Risk Management on the Profitability Performance of Commercial Bank of Ethiopia

Zemedkun Hiwot
2019
The objective of the study was to assess the Effect of Credit Risk Management on the Profitability Performance of Commercial Bank of Ethiopia proxied by ROA and ROE, The study used a secondary data for the period between 2000 to 2018 for nineteen(19) years.The data was collected from CBE MIS Department,CBE Annual Report and National Bank of Ethiopia (NBE). The collected data was analyzed by using Time Series data regression model and EView7 software to regress the data , the result showed that
more » ... result showed that credit risk management which is measured by non- performing loan to total loan ratio, and management efficiency that is measured by the ratio of operating expense to total income have negative and significant effect on both dependent variables (ROA and ROE).The other independent variables (CAR,TLTA,NII&LR) are insignificat.The study recommended that the bank's credit risk management needs strong attention & follow up regarding performer capacetiy building and to review their credit policey & procedure in order to minimize high incidence of NPL. This is because it has significant & negetive effect on the profitability of the bank, and also Management efficencey result shows that there is a lack of efficiency in expenses management since banks pass part of increased cost to customers and the remaining part to profits. Therefore, the CBE should also give more attention in reduction of expenses to improve its profitability of the industry.
doi:10.20372/nadre/8201 fatcat:yrwgklznibbg5i2jq2lfjjlcti