Non-performing Loans and Bank Profitability

Abstract

This study aims to investigate the association between non-performing loans (NPLs) and the profitability of banks in Bangladesh. The data of twenty-five listed banks for the twelve years spanning from 2010 to 2021 have been analyzed to achieve the research objective. through the use of the ordinary least square (OLS) regression model, we found that the NPL has a negative significant impact on the profitability determined by the return on asset (ROA). In addition, the study revealed that the bank size, which is represented by banks’ total assets, is also inversely related to the profitability of the sample banks used in this research. The study concludes that the stakeholders, particularly the management of the banks, as well as the regulators, should be more cautious about NPLs and should try to lessen the level of NPLs because it can bring devastating results both on the microeconomic as well as on macroeconomic metrics of a developing country like Bangladesh.  

Keywords: {'name': 'Non-performing loans'}, {'name': 'liquidity risk'}, {'name': 'bank profitability'}

Authors & affiliations

Rejaul Karim
Affiliation not supplied

Md. Mustaqim Roshid
Affiliation not supplied

Farjana Bashar Shamme
Affiliation not supplied

Md. Mahmud Hasan
Affiliation not supplied

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