Credit Risk Management and Profitability of Commercial Banks: A Case Study of ABSA Bank Kabale Branch.
The study assessed the credit risk management and profitability of commercial banks taking ABSA Bank Kabale Branch as a case study. The objectives of the were; to analyze credit risk management and profitability of commercial banks, to examine the present status of non¬performing loans, cash reserve...
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| Format: | Thesis |
| Language: | en_US |
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Kabale University
2024
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| Online Access: | http://hdl.handle.net/20.500.12493/1602 |
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| author | Akanyijuka, Bruno |
| author_facet | Akanyijuka, Bruno |
| author_sort | Akanyijuka, Bruno |
| collection | KAB-DR |
| description | The study assessed the credit risk management and profitability of commercial banks taking ABSA Bank Kabale Branch as a case study. The objectives of the were; to analyze credit risk management and profitability of commercial banks, to examine the present status of non¬performing loans, cash reserve ratio, and capital adequacy ratio in commercial banks, and to analyze the relationship between credit risk management and profitability of commercial banks.
The study adopted a quantitative paradigm since it statistical tools. The study used a descriptive design to describe the profile of the respondents in terms of age group of owners, and level of education. The study population for this study involved all the staff of ABSA bank, Kabale branch. These included all the 64 staff of the institution from all the departments. The data was organized and financial ratios were computed using an Excel program to obtain the study variables. Data from questionnaires were summarized, using frequencies and percentages.
The study found that non-performing loans as a percentage of total loans have decreased from 8.3% year 2015 to 5.6% year 2022. Also, the findings indicate that the average (mean) default rate throughout the study is 6.186% and this implies a bank's problem of defaulting loans by the customers. The study revealed that the gross loans have increased from 130.7 billion to 495. 7 billion and non-performing loans from 10.893 billion to 32.9 billion. About what extent credit appraisal is used by ABSA, the majority (42.9%) of respondents reported to a great extent, 21. 4 % reported to a moderate extent, 19. 6% reported to a very great extent, while just 16.1 % reported to no extent by evaluating the character, record of meeting past obligations, repayment capacity, credit history as well as moral aspect of loan applicant, by requiring collateral as security for the loan, by considering the relationship with the customer, account performance, deposits, etc.
This research also concluded that credit risk management practices including client appraisal, credit risk analysis, credit risk monitoring and control, and lending policies are mostly used by ABSA to some great extent. The study also concluded that credit risk management contributes to bank performance and improves to some extent the financial performance of ABSA. This means credit risk management practices affect the bank's performance and contribute to financial performance.
The study recommended that banking institutions develop an internal risk rating system to monitor the quality of loan portfolios. The study also recommends conducting credit risk analysis on businesses and individuals before lending. There is a need for banking institutions to enhance their internal credit risk assessment practices, develop credit risk scoring analysis tools to assess loan applicants' capability as well as develop their internal risk rating system to monitor the quality of all loan portfolios. |
| format | Thesis |
| id | oai:idr.kab.ac.ug:20.500.12493-1602 |
| institution | KAB-DR |
| language | en_US |
| publishDate | 2024 |
| publisher | Kabale University |
| record_format | dspace |
| spelling | oai:idr.kab.ac.ug:20.500.12493-16022024-01-24T07:52:42Z Credit Risk Management and Profitability of Commercial Banks: A Case Study of ABSA Bank Kabale Branch. Akanyijuka, Bruno Credit Risk Management Profitability Commercial Banks ABSA Bank Kabale Branch The study assessed the credit risk management and profitability of commercial banks taking ABSA Bank Kabale Branch as a case study. The objectives of the were; to analyze credit risk management and profitability of commercial banks, to examine the present status of non¬performing loans, cash reserve ratio, and capital adequacy ratio in commercial banks, and to analyze the relationship between credit risk management and profitability of commercial banks. The study adopted a quantitative paradigm since it statistical tools. The study used a descriptive design to describe the profile of the respondents in terms of age group of owners, and level of education. The study population for this study involved all the staff of ABSA bank, Kabale branch. These included all the 64 staff of the institution from all the departments. The data was organized and financial ratios were computed using an Excel program to obtain the study variables. Data from questionnaires were summarized, using frequencies and percentages. The study found that non-performing loans as a percentage of total loans have decreased from 8.3% year 2015 to 5.6% year 2022. Also, the findings indicate that the average (mean) default rate throughout the study is 6.186% and this implies a bank's problem of defaulting loans by the customers. The study revealed that the gross loans have increased from 130.7 billion to 495. 7 billion and non-performing loans from 10.893 billion to 32.9 billion. About what extent credit appraisal is used by ABSA, the majority (42.9%) of respondents reported to a great extent, 21. 4 % reported to a moderate extent, 19. 6% reported to a very great extent, while just 16.1 % reported to no extent by evaluating the character, record of meeting past obligations, repayment capacity, credit history as well as moral aspect of loan applicant, by requiring collateral as security for the loan, by considering the relationship with the customer, account performance, deposits, etc. This research also concluded that credit risk management practices including client appraisal, credit risk analysis, credit risk monitoring and control, and lending policies are mostly used by ABSA to some great extent. The study also concluded that credit risk management contributes to bank performance and improves to some extent the financial performance of ABSA. This means credit risk management practices affect the bank's performance and contribute to financial performance. The study recommended that banking institutions develop an internal risk rating system to monitor the quality of loan portfolios. The study also recommends conducting credit risk analysis on businesses and individuals before lending. There is a need for banking institutions to enhance their internal credit risk assessment practices, develop credit risk scoring analysis tools to assess loan applicants' capability as well as develop their internal risk rating system to monitor the quality of all loan portfolios. 2024-01-03T13:01:23Z 2024-01-03T13:01:23Z 2023 Thesis Akanyijuka, Bruno (2023). Credit Risk Management and Profitability of Commercial Banks: A Case Study of ABSA Bank Kabale Branch. Kabale: Kabale University. http://hdl.handle.net/20.500.12493/1602 en_US Attribution-NonCommercial-NoDerivs 3.0 United States http://creativecommons.org/licenses/by-nc-nd/3.0/us/ application/pdf Kabale University |
| spellingShingle | Credit Risk Management Profitability Commercial Banks ABSA Bank Kabale Branch Akanyijuka, Bruno Credit Risk Management and Profitability of Commercial Banks: A Case Study of ABSA Bank Kabale Branch. |
| title | Credit Risk Management and Profitability of Commercial Banks: A Case Study of ABSA Bank Kabale Branch. |
| title_full | Credit Risk Management and Profitability of Commercial Banks: A Case Study of ABSA Bank Kabale Branch. |
| title_fullStr | Credit Risk Management and Profitability of Commercial Banks: A Case Study of ABSA Bank Kabale Branch. |
| title_full_unstemmed | Credit Risk Management and Profitability of Commercial Banks: A Case Study of ABSA Bank Kabale Branch. |
| title_short | Credit Risk Management and Profitability of Commercial Banks: A Case Study of ABSA Bank Kabale Branch. |
| title_sort | credit risk management and profitability of commercial banks a case study of absa bank kabale branch |
| topic | Credit Risk Management Profitability Commercial Banks ABSA Bank Kabale Branch |
| url | http://hdl.handle.net/20.500.12493/1602 |
| work_keys_str_mv | AT akanyijukabruno creditriskmanagementandprofitabilityofcommercialbanksacasestudyofabsabankkabalebranch |