Credit risk is an internal determinant of bank performance. The higher the exposure of a bank to credit risk, the higher the tendency of the banks to experience financial crisis. In summary the important elements of managing risk include credit appraisal, diversification, credit control proper training of personnel.
From the above mentioned results it can be concluded that the credit risk management have inverse relationship with bank performance. Thus the management needs to be cautious about nonperforming loans, loan and advances and liquidity ratio because these ratios are severely affecting the profitability of banks.
Correlation Matrix
Table 5presents the information on the dependent as well as explanatory variables and their association to each other.
We find that there is a negative association between NPLs and ROA as well as ROE.
There is a negative relationship with size, loan loss reserves to gross NPLs and unemployment, whereas we found a positive association with cost to i.
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Descriptive Statistics
Table 2 represents that the mean values for NPL, ROA and ROE were 7.26, 1.398, and 11.126, respectively.
The mean value of FP indicates that the banks are acting well and are making incomes.
We applied a paired t-test to explore to what extent there is a significant difference between IBs and CBs for NPLs.
Our findings reveal that there is a signif.
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Does credit risk management affect the profitability of Nigerian banks?
The findings revealed that credit risk management has a significant impact on the profitability of Nigerian banks.
It concluded that banks’ profitability is inversely influenced by the levels of loans and advances, non-performing loans and deposits thereby exposing them to great risk of illiquidity and distress.
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Does risk affect financial performance?
Enhancing the argument on how risk affects financial performance may cutback the probability of insolvency and provide greater stability of the universal banks.
It must be noted that the operational undertakings of every institution is utmost to the success and survival of that entity.
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How does credit risk affect bank performance?
The higher the acquaintance of a bank to credit risk, the higher the propensity of the bank to experience financial crisis and vice-versa.
Among other risks faced by banks, credit risk play an important role on banks’ financial performance since a large chunk of banks’ revenue accrues from loans from which interest is derived.
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Impact of Covid as A Mediator Over The Link Between NPLs and FP
We adopt Baron and Kenny's [13] regression method to examine whether COVID-19 pandemic mediates the association between NPLs and FP.
Testing for mediation consequence can be achieved through three steps: (1) regressing the mediator toward the independent variables, (2) regressing the dependent variable toward the independent variables, and (3) regr.
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Regression Analysis
Table 6 shows the result of predictable relationship between NPLs and FP for the whole sample and the whole period (before and during the pandemic) according to model.
1) Banks with a great level of income are less involved in hazardous investments, which may lead to NPLs in the future; therefore, we argue that there is a negative link between FP an.
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Why is credit risk management important?
[Show full abstract] Credit risk management in banks has become more important not only because of the financial crisis that the industry is experiencing currently, but also a crucial concept which determine banks’ survival, growth and profitability.
Form of funded credit derivative
A credit-linked note (CLN) is a form of funded credit derivative.
It is structured as a security with an embedded credit default swap allowing the issuer to transfer a specific credit risk to credit investors.
The issuer is not obligated to repay the debt if a specified event occurs.
This eliminates a third-party insurance provider.
