Abstract:
This report is a study on "Evaluating the Effect of Credit Risk and Capital Adequacy on
Profitability: A Panel Data Analysis of State-Owned Commercial Banks in Bangladesh". This
Panel Data Analysis examines how reciprocal relationships between credit risk management,
capital adequacy and the financial results of state-owned commercial banks in Bangladesh kept shifting from 2014 through 2023. Using secondary data collected from annual reports, the study measures the profitability of banks by their Return on Assets (ROA), while considering factors such as the Non-Performing Loan to Total Loan Ratio (NPLTLR), Capital Adequacy Ratio (CAR), Credit to Deposit Ratio (CDR), Cost to Income Ratio (CIR) and size of the bank. Moreover, this report emphasizes in showing the impact of Credit risk on Bank Profitability and I found the significant evidence that credit risk has an impact on Bank's profitability. For this study I have run several statistical tests such as T-test, Chi-Square test, normality test, multiple regression model, heteroscedasticity test etc. For regression analysis I have taken four independent variables such as Non-performing Loan to Total Loan Ratio (NPLTLR), Capital Adequacy Ratio (CAR), Credit Deposit Ratio (CDR), Cost to income Ratio (CIR) and Bank Size (BS) which are indicators of credit risk. And also take one dependent variable such as Return on Asset which is indicators of Banks profitability. Then, I put those variables in Stata and perform regression analysis. I have taken 10-year time series data range from 2014-2023 as input of regression analysis. This report is categorized in seven different chapters including introduction, literature review, methodology of the study, credit & financial performance of of state-owned banks of Bangladesh, impact of credit risk on state-owned banks (SBL,ABL, RPL and JBL's) profitability and findings, recommendation & conclusion. After the analysis of collected data and information, it shows evidence that credit risk has significant impact on Bank's profitability. To be more ensuring that how much and how credit management influences on bank profitability, further study and research should be carried out in future.
