Impact of Credit Risk on Profitability of Private Commercial Banks in Ethiopia

Abstract

The general objective of the study was to examine the impact of credit risk on profitability of private commercial banks in Ethiopia. To examine the profitability as a dependent variable the researcher used ROE (return on Equity) as measurement tool. The researcher used secondary data’s of ten banks eleven years’ data by using panel data analysis. Data used for this study were obtained from National Bank of Ethiopia and the bank’s annual report. To achieve the intended objective of this study Explanatory research design used as the research method. Quantitative approach was used to collect the qualitative data from the audit report of the bank. The analysis of the data was made indescriptive statistics analysis like, mean, and standard deviation and inferential like regression and Pearson correlation to give the meaningful conclusions for the result of this study. Then the findings of this study were: non-performing loan, net interest margin (NIM), Loan to deposit, Loan loss Provision has significant impact on profitability of private commercial Banks in Ethiopia, and Capital adequacy ratio has no significant impact on profitability of private commercial Banks in Ethiopia