Scribd Logo
Upload

Welcome to Scribd!

  • 188 views

    The Impacts of Non-Performing Loan On Profitability: An Empirical Study On The Banking Sector of Dhaka Stock Exchange

    Uploaded by

    murshed tamanna
    The document discusses non-performing loans and their impact on bank profitability in Bangladesh. It finds that non-performing loans negatively impact a bank's net interest margin. The non-performing loan ratio has been increasing in Bangladeshi banks, reaching over 25% for some state-owned banks. High non-performing loans decrease bank interest income and cash flow. The document recommends that banks improve credit analysis before approving loans and more closely monitor existing loans to reduce non-performing loans.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd

    The Impacts of Non-Performing Loan On Profitability: An Empirical Study On The Banking Sector of Dhaka Stock Exchange

    Uploaded by

    murshed tamanna
    188 views36 pages
    The document discusses non-performing loans and their impact on bank profitability in Bangladesh. It finds that non-performing loans negatively impact a bank's net interest margin. The non-performing loan ratio has been increasing in Bangladeshi banks, reaching over 25% for some state-owned banks. High non-performing loans decrease bank interest income and cash flow. The document recommends that banks improve credit analysis before approving loans and more closely monitor existing loans to reduce non-performing loans.

    Original Description:

    Acquisition of Warid by Bharti

    Original Title

    FINAL-fy-slide

    Copyright

    © © All Rights Reserved

    Available Formats

    PPTX, PDF, TXT or read online from Scribd

    Did you find this document useful?

    Is this content inappropriate?

    The document discusses non-performing loans and their impact on bank profitability in Bangladesh. It finds that non-performing loans negatively impact a bank's net interest margin. The non-performing loan ratio has been increasing in Bangladeshi banks, reaching over 25% for some state-owned banks. High non-performing loans decrease bank interest income and cash flow. The document recommends that banks improve credit analysis before approving loans and more closely monitor existing loans to reduce non-performing loans.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    188 views36 pages

    The Impacts of Non-Performing Loan On Profitability: An Empirical Study On The Banking Sector of Dhaka Stock Exchange

    Uploaded by

    murshed tamanna
    The document discusses non-performing loans and their impact on bank profitability in Bangladesh. It finds that non-performing loans negatively impact a bank's net interest margin. The non-performing loan ratio has been increasing in Bangladeshi banks, reaching over 25% for some state-owned banks. High non-performing loans decrease bank interest income and cash flow. The document recommends that banks improve credit analysis before approving loans and more closely monitor existing loans to reduce non-performing loans.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    of 36

    The Impacts of Non-Performing Loan on Profitability: An

    Empirical Study
    on the Banking Sector of
    Dhaka Stock Exchange

    GROUP ONE
    Ulfat Murshed Tamanna 16221003
    Tasmiah Binte Noor 16221005
    Rifat Ibna Lokman 16221007
    Tasnim Ansari 16221009
    NON PERFORMING
    OVERVIEW: LOAN
    M&B
    NON PERFORMING LOAN

    Loans that are 90 days or more past due and still accruing
    interest

    Loans which have been placed on non-accrual

    Interest payments are not being made on scheduled


    time.
    OVERVIEW OF NON PERFORMING LOAN

    Started during Expansion of Banking


    (1972-1981) credit policy Infrastructure

    Adopted Enact money


    Prudential norms loan court act
    Research NON PERFORMING
    Methodology: LOAN
    M&B
    RESEARCH METHODOLOGY

    30 Commercial Bank Listed in DSE

    Collected 3 Years of Data of Commercial


    Banks

    Data has been tested with Regression Analysis


    MEASUREMENT OF
    VARIABLES
    M&B
    MEASUREMENT OF
    VARIABLES

    DEPENDENT
      𝐼𝑛𝑣𝑒𝑠𝑡𝑚𝑒𝑛𝑡 𝐼𝑛𝑐𝑜𝑚𝑒 − 𝐼𝑛𝑡𝑒𝑟𝑒𝑠𝑡 𝐸𝑥𝑝𝑒𝑛𝑠𝑒
    𝑁𝐼𝑀 =
    Net Interest 𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝐸𝑎𝑟𝑛𝑖𝑛𝑔 𝐴𝑠𝑠𝑒𝑡𝑠
    Margin
    MEASUREMENT OF
    VARIABLES

    INDEPENDENT
      𝑁𝑜𝑛 𝑃𝑒𝑟𝑓𝑜𝑟𝑚𝑖𝑛𝑔 𝐿𝑜𝑎𝑛𝑠
    Non 𝑁𝑃𝐿𝑅=
    Performing 𝑇𝑜𝑡𝑎𝑙 𝑁𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝑂𝑢𝑡𝑠𝑡𝑎𝑛𝑑𝑖𝑛𝑔 𝐿𝑜𝑎𝑛𝑠
    Loan Ratio
    MEASUREMENT OF
    VARIABLES

    INDEPENDENT
      𝑇𝑖𝑒𝑟 1 𝐶𝑎𝑝𝑖𝑡𝑎𝑙+𝑇𝑖𝑒𝑟 2𝐶𝑎𝑝𝑖𝑡𝑎𝑙
    𝐶𝐴𝑅=
    Capital 𝑅𝑖𝑠𝑘 𝑊𝑒𝑖𝑔h𝑡𝑒𝑑 𝐴𝑠𝑠𝑒𝑡𝑠
    Adequacy Ratio
    MEASUREMENT OF
    VARIABLES

    INDEPENDENT
      𝑇𝑜𝑡𝑎𝑙 𝑁𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝑂𝑢𝑡𝑠𝑡𝑎𝑛𝑑𝑖𝑛𝑔 𝐿𝑜𝑎𝑛𝑠
    𝐿𝐷𝑅=
    Loan Deposit 𝑇𝑜𝑡𝑎𝑙 𝑁𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝐷𝑒𝑝𝑜𝑠𝑖𝑡𝑠
    Ratio
    NON PERFORMING
    CAUSES: LOAN
    M&B
    CAUSES OF NON PERFORMING LOAN

    Lack of business Unwillingness Non-attractive


    experience to pay Industry

    1 2 3
    CAUSES OF NON PERFORMING LOAN

    Poor Delayed
    Strong
    Management Disbursement
    Competition
    capability of Fund

    4 5 6
    CAUSES OF NON PERFORMING LOAN

    Lack of Lack of
    Proper taking Proper
    Monitoring Action

    7 8
    NON PERFORMING
    PITFALLS: LOAN
    M&B
    PITFALLS OF NON PERFORMING LOAN

    Credit
    Efficiency Negative
    Crunch
    problem relationship
    situation
    Hypothesis of the study
    Ho: there is no significant impact of Non-Performing Loan (NPL) on
    Profitability (Net Interest Margin).

    H1: There is significant impact of Non-Performing Loan (NPL) on


    Profitability (Net Interest Margin)
    REGRESSIONANALYSIS
    M&B
    REGRESSION ANALYSIS
    DEPENDENT

    Net Interest
    Margin

    INDEPENDENT INDEPENDENT INDEPENDENT

    Non
    Capital Loan Deposit
    Performing
    Adequacy Ratio Ratio
    Loan Ratio
    REGRESSION
    ANALYSIS
    REGRESSION
    ANALYSIS
    𝑅2 =13 .09 %
     

    P- Value < 0.05


    SIGNIFICANT SIGNIFICANT

    P- Value > 0.05 INSIGNIFICANT


    INSIGNIFICANT

    NEGATIVE
    POSITIVE
    REGRESSION ANALYSIS

    𝒚 ̂ = 𝟒.𝟓𝟓𝟗𝟗𝟎 − 𝟎.𝟐𝟎𝟗𝟗𝟕𝒙𝟏 − 𝟎.𝟎𝟕𝟒𝟑𝟎𝒙𝟐 + 𝟎.𝟎𝟎𝟗𝟕𝟐𝒙𝟑

    DEPENDENT INDEPENDENT INDEPENDENT INDEPENDENT

    Non Capital Loan


    Net Interest Performing Adequacy Deposit
    Margin Loan Ratio Ratio Ratio
    ANALYSIS: PART 2
    M&B
    NPL% of total loans

    30 26.5

    25 20.4
    20

    15
    NPL% of total loans
    10 7
    4.9
    5

    0
    s s s s
    ank n k
    ank ank
    b Ba B B
    ate zed ig
    n
    ate
    St l i re i v
    ic a Fo Pr
    e
    Sp
    ANALYSIS Part 2
    Bangladesh is the 12th ranked
    nation in terms of non-
    performing loan ratio (NPRL)
    in the world having a ratio of
    10.78%

    Tk 11,660 crore had been


    provided to state banks
    between 2012 and 2017,

    State-owned bank’s NPLR


    crossed above 27%
    ANALYSIS Part 2

    Sonali Bank
    BASIC Bank Janata Bank
    3400 crore
    6,538 crore 8,300 crore

    2012 2015 2018


    Increased demand for loans and
    Early bank services and increased
    Expansion consumer spending

     Loans unpaid for at least 90


    days, have more than 90 days'
    worth of interest delayed

    Economic
    Recession Mid
    Cycle Interest Income

    Decrease in Net Income


    Late
    Banks borrow the money deposited by account holders
    and loan it to their customers.

    the bank is unable to recover the principal.

    Unrecoverable income and a decrease in interest


    collections translate into less cash flow

    Banks tend to resort to tighter credit policies

    Slow down economic growth


    8
    7.2 7.3
    7 6.88
    6.52
    6.04 6.06
    6

    0
    2012 2013 2014 2015 2016 2017
    • 2 domestic commercial banks, 3 specialized development banks, 2 foreign
    banks joined the ranks of NPL

    • There has been no lack of directives coming out of the central bank on how banks
    need to manage their respective portfolios to stem this alarming tide.

    • Abul Maal Abdul Muhith said, “If the Bank’s average NPLR stands below 10%,
    that bank assumed to be safe.”

    • To attain MDG goals, NPLR was a major concern. If the rate doesn’t go down, the
    result won’t be positive at all.
    Recommendation
    Not make loan without conducting proper credit analysis

    Additional collateral is required when the value of the previous has


    decreased

    Loan officer should not cross Specified limit;

    Loan supervision and review should be conducted in regular basis


    Before sanctioning loans, all the documents related to the loan should be
    collected and preserved

    Banks should not sacrifice the safety of the fund to get extreme profit from
    risky investment.in many cases, dishonest borrowers utilize loan not in the
    purpose stated in the agreement but in the purpose of consumption or in
    other types of risky investment.
    Banks should evaluate the performance of the company on the basis of
    periodic financial statements.

    Bank's concerned credit specialist must consider all reasonable alternatives


    for cleaning up the troubled loan,
    THANK YOU

    You might also like