Credit Risk and Profitability of Commercial Bank in Nepal

Abstract

Sciences xii ABSTRACT The objectives of research are to examine the current status of the credit risk and profitability of commercial bank, to analyses the relationship between credit risk and financial performance of sampled banks and to examine the impact of credit risk on the financial performance of sampled banks. The descriptive, correlation and causal comparative research design. The secondary data are taken from the sample bank. The sample bank are three from the commercial bank in Nepal. The research variables are profitability, credit risk, liquidity ratio, capital adequacy ratio, interest spread rate, base rate. The financial and statistical analysis are done from the achievement of the objectives through given raw data. The financial analysis is form the various ratio analysis and statistical analysis from the descriptive statistics, correlation and regression analysis. SPSS and excel are the tool for the analysis. The finding of the study are the variables has a the gap between minimum and maximum is very and on the basis of the mean the standard deviation is seem to be very high which represent the current position of the research variables is the very fluctuating nature of the data. The relationship between profitability and credit risk, profitability and liquidity is positive but not significant. The capital adequacy and ratio and profitability is negative and not significant. The interest spread rate and profitability is positive and significant relationship. The base rate has negative relationship to the profitability and significant too. The impact of credit risk and to the profitability is negative and not significant. The liquidity ratio and capital adequacy has positive impact to the profitability but not significant. The interest spread rate positive and base rate negative and significantly impact to the profitability of the bank. Keywords: Return on Equity, Non-performing loan, Capital Adequacy Ratio, Liquidity Ratio, Interest Spread Rate and Base Rate