The Effect of Credit Risk on Financial Performance in Commercial Bank of Ethiopia (Camel Approach)
No Thumbnail Available
Date
2024-06-04
Authors
Journal Title
Journal ISSN
Volume Title
Publisher
A.A.U.
Abstract
This study investigates the effect of credit risk on the profitability, measured by the Return on
Assets, of the Commercial Bank of Ethiopia. The research utilized secondary data sourced from
the audited financial reports of the CBE, the National Bank, and the CBE’s portal page,
covering the period from 2009 to 2023. Analysis was conducted using STATA 15 software,
employing descriptive statistics and time series data to conduct linear regression. The findings
reveal a substantial and inverse correlation between ROA and Non-Performing Loans , Capital
Adequacy Ratio, Bank Productivity and Net Interest Margin. Conversely, ROA shows a positive
correlation with Loan Growth Rate. The recommendations from this study suggest that the
Commercial Bank of Ethiopia should enhance its credit risk management capabilities.
Additionally, it is advised that the bank should manage staff-related expenses more effectively
and ensure that economical profitability is considered alongside financial profitability for each
branch. To maximize profitability (ROA), the CBE should prioritize credit risk management
strategies to minimize non-performing loans.