The Impact of Credit Risk on the Profitability of Selected Commercial Banks of Bangladesh


  • Md. Monzur Morshed Bhuiya Professor, Department of Finance, Jagannath University, Dhaka, Bangladesh
  • Md. Mahabub Miah PG Student, Department of Finance, Jagannath University, Dhaka, Bangladesh
  • Tasnim Uddin Chowdhury Assistant Professor of Finance, Department of Business Administration, Premier University, Chattogram, Bangladesh



Credit Risk, Non-Performing Loan, Basel III, Profitability, Bangladesh


The objective of the study is to find out the impact of credit risk on the profitability of selected commercial banks of Bangladesh. To perform this study, we have selected 10 commercial banks from 61 scheduled commercial banks. The selected banks consist of four categories. Among them, three are state owned banks, three are private owned non Islamic banks, three are private owned Islamic banks and one is specialized commercial bank. To show the impact of credit risk on profitability, we have selected ten variables which are calculated using data collected from 2009 to 2018. Among the ten variables, two variables have been used as dependent variables which include Return on Equity (ROE) and Return on Assets (ROA), and among the independent variables include seven bank specific variables and one macroeconomic variable. To find out the result, multiple-regression model has been used and shown the effects of independent variables on ROE & ROA separately. Besides this, an attempt has been made to find out the effect of Basel III on profitability. To show the effect, we have used three years data before Basel III and three years data after Basel III and showed the individual effect on ROE and ROA. The regression result shows that non-performing loan ratio (NPLR), Loan Loss Provision Ratio (LLPR) and macroeconomic variable GDP has a significant negative impact on profitability ratio ROE. The result also shows that Non-performing loan ratio (NPLR), Loan and advance to total deposits ratio (LATD) have a significant impact on profitability ratio Return on Assets(ROA). The regression result for Basel III effect represented that Nonperforming loan has a significant negative impact on Return on Equity (ROE) but this impact is less than that of before Basel III.


Abbas, A., Zaidi, S. A. H., Ahmad, W., & Ashraf, R. U. (2014). Credit Risk Exposure and Performance of Banking Sector of Pakistan. Journal of Basic and Applied Scientific Research, 4(3), 240-245.

Abdelrahim, D. K. (2013). Effectiveness of credit risk management of Saudi banks in the light of financial crisis: A Qualitative Study. Asian transactions on Basic and Applied Sciences, 3(2), 73-91.

Alalade, S. A., Binuyo, B. & Oguntodu, J. (2014). Managing Credit Riskto Optimize Banks’ profitability: A survey of selected Banks in Lagos State, Nigeria. Research Journal of Finance and Accounting, 5.

Al-Tamimi, H. A. H., & AlMazrooei, F. M. (2007). Bank’s risk management: A comparison study of UAE National and Foreign banks. The Journal of Risk Finance, 8(4), 394-409.

Arif, A., Abrar, A., & Afzal, M. (2012). Credit risk and shareholders’ Value in a Developing Economy: Evidence from Pakistani Banking System. Journal of Economics and Behavioral Studies, 4, 87-95.

Drehmann, M. Sorensen, S., & Stringa, M. (2008). The Integreted Impact of Credit and Interest Rate Risk on Banks: An Economic Value and Capital Adequacy Perspective. Bank of England Woring Paper No, 339.

Ejoh, N. O., Okpa, I. P., & Egbe, A. A. (2014). The impact of credit and liquidity risk management on the profitability of deposit money banks in Nigeria. International Journal of Economics, Commerce and Management, 2(9).

Gatete, A. (2015, October). The effect of bank size on profitability of commercial banks in Kenya. Retrieved from

Hosna, A., Manzura, B. & Juanjuan, S. (2009). Credit risk management and profitability in commercial Banks in Sweden. Gothenburg University Library, Retrieved from

Islam, F. T. (2018). Evaluating Loan Loss Provisioning for Non-Performing loans and Its Impact on the Profitability of commercial Banks in Bangladesh. Asian Finance & Banking review, 2(2), 33-41.

Kurawa, J. M., & Garba, S. (2014). An Evaluation of the effect of Credit Risk Management (CRM) on the profitability of Nigerian Banks. Journal of Modern Accounting and auditing, 10(1), 104-115.

Noman, A. H. M., Pervin, S., Chowdhury, M. M. C., & Banna, H. (2015). The Effect of Credit Risk on the Banking Profitability: A Case on Bangladesh. Global journal of Management and Business, 15(3), 40-48.

Onaolapo, A. R. (2012). Analysis of credit risk management efficiency in Nigeria commercial banking Sector, (2004-2009). Far East ournal of Marketing and Management, 2. Retrieved from

Petria, N. P., Capraru, B., & Ihnatov, I. (2015). Determinants of banks’ profitability: E6vidence from EU 27 banking system. Procedia Economics and Finance, 20, 518-524.

Poudel, S. R. (2018). Impact of credit risk on profitability of commercial banks in Nepal. Journal of Applied and Advanced Research, 3(6), 161-170.

Raza, H., Saeed, A., & Hena, S. (2019). Determinants of Profitability in Banking Sector: An Evidence from Pakistan. European Scientific Journal, 15(7), 35-48.

Richadr, E., Chijoriga, M., Kaijage, E., Peterson, C., & Bohman, H. (2008). Credit risk management system of a commercial bank in Tanzania. Internationat journal of Emerging Markets, 3(3), 323-332.

Samad, A. (2015). Determinants of Banks Profitability: Emperical Evidence from Bangladesh Commercial Banks. International Journal of Financial Research, 6(3). DOI: 10.5430/ijfr.v6n3p173.

Tan, Y. A, & Floros, C. (2012). Bank Profitability and GDP Growth in China: A note. Journal of Chinese Economic and Business Studies, 10(3), 267-273.

Yeasin, H. M. (2022, January 24). Impact of credit risk management on financial performance: A study of commercial banks in Bangladesh. Interdisciplinary journal of Applied and Basic Subjects, 2(1), 14-22.




How to Cite

Morshed Bhuiya, M. M., Mahabub Miah, M., & Uddin Chowdhury, T. (2023). The Impact of Credit Risk on the Profitability of Selected Commercial Banks of Bangladesh. Asian Journal of Managerial Science, 12(1), 19–25.