According single birr outstanding principal balance of

Accordingto table 4.1, all variables comprised 100 observations and the NPL measured usedin this study by outstanding principal balance of loans past due more than 90days to outstanding principal balance of loan. During the previous Tenconsecutive years (2006-2016) private Commercial banks in Ethiopia incurred9.8% NPLs on averages from its total loan which is above the requirement of 5%(National Bank of Ethiopia, 2008) and for comparison purpose of its spread thevalue of the standard deviation was 9.94 percent.

Then as per theaforementioned statistics of NPLs Ethiopian private commercial banks? loanfailure is a big problem. In the sample period NPL was ranged from 0.24 % to41.

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5% the minimum and maximum value respectively and it has a mean of9.8%.Among the sampled banks incurred 41.5 cents of NPL for a single birroutstanding principal balance of loan which was in excess of the average 30%NPLs recorded in sub-Saharan African countries during the 1990s financialcrisis (Fofack, 2005). On the other hand, the least NPL of the sampled banks incurred0.24 cents of NPL for a single birr outstanding principal balance of loan.

Thisimplies that high ratio of NPLs in banking system or rising tendency leads to adecrease in the profitability and capital adequacy ratio of the banks andnegatively effects economic growth of the country.Inrelation to the explanatory variables such as GDP, INFL, EXG, LR, BS, LG, LIQand EA tell us some remarkable statistics that have to be mentioned. Among theBank Specific Independent variables bank size was measured by natural log oftotal asset. Mean value of the size was 22.5 and the maximum and minimum valueswere birr 276,286 million and birr 1,073 million for Awash International Bank(2015) and United Bank (2006) respectively. And also there was a differencebetween other Ethiopian private commercial banks asset size because of thestandard deviation of 1.

4. The average total assets of Ethiopian private commercialbanks have shown consistent growth throughout the studied period. Hence, thelarger bank size induces economy of scale there by making larger banks moreprofitable and will reduce the cost of gathering and processing information.Since larger banks are more able to solve problems of information asymmetry incomparison to their smaller counterparts.

Skilled employees and quality informationbases, larger banks are more effective in credit analysis and monitoring theirdebtors. Therefore larger banks have the positive impact of the banks and thecountry’s economy. The second bank specific Determinants is Loan growth wasmeasured as the annual percentage change in total loans & advances and thisshowed a mean of 17.19%. This indicates that, on average, growth rate was17.59% during the ten years period and growth of total loan throughout thesample period were ranged from -12.29% to 45.

3% with standard deviation of10.53%. The 10.

53% of standard deviation indicates the existence of highvariation in growth rate among private commercial banks in Ethiopia. This impliesthat private commercial Banks of Ethiopia have been utilized the liquid assetseffectively and efficiently and not retained more liquid assets which is above20% deposits ( NBE 2007) and the banks generate income from credit facilitiesto borrowers.Themean value of liquidity of Ethiopian private commercial banks shown as 24% andstandard deviation of 5.5 percent. The study indicated that liquidity ofprivate commercial banks are decreased for the last 10 years due to increasedof credit facilities and for intended it may happen liquidity risk. EarningAbility is the last bank specific explanatory variables which are measured bynet income to total asset of the respective private commercial banks.

Mean ofthe return was indicated 2.64 percent with the standard deviation of 1.2%.Whichspecified that the profitability variation between the sample banks were verysmall.

This implies that during the study period Ethiopian private commercialbanks have highly competition each other by its service and products, and thecredit risk also have similar quality among the banks. Thereby these banksrequire to use advanced technology to optimize the use of their assets toincrease the return on their assets. For the total sample banks, the maximumand minimum values of Return on asset was ranged from 6.19% to -2.1% That meansthe most profitable bank among the sampled banks earned 6.19% of profit aftertax for a single birr invested in the assets of the firm. On the other hand,the least profitable of the sampled banks incurred loss of -2.

1 cents for eachbirr invested in the assets of the firm. The other independent variables aremacroeconomic indicators that can affect banks NPL over time. The mean valueof inflation was 12.89% and standard deviation of 12.02% the inflation rate ofthe country over the past ten years was recorded from 36.4% (2009) to -10.5% (2002).A1 This indicates that inflation rate was highly dispersed within the studyperiods.

This implies that due to non moderate inflation rate it arise unsoundeconomy and it is challenged to enhance the economic growth by mobilizing theresource of the country (NBE, 2009).Economic policy keep the price of differentproducts as a result inflation rate is decreased for the last five years (NBE, 2015Audited report).Asper the table 4.1 mentioned the mean value of GDP growth rate is 9.1% ,standard deviation of 4% and the maximum and minimum value was tells us 12.

64% (2005)and – 2.1% (2003) A2 respectively.This indicates that the economic growth during the previous ten years remainssounded and the result of this stable economic growth could have possibleimpact for Ethiopian private commercial banks and the country. Exchange rateshown that standard deviation was 4.438, mean value of 12.

51 and maximum andminimum value revealed 20.09 and 12.51 respectively. Unlike GDP, INFL and othervariables used in this study, EXG rate had the higher standard deviation (4.

438).Thisimplies that the foreign exchange rate in Ethiopia during the study period remainshighly unsound. Since the country’s currency highly devaluated and during the periodthe banks client specially importers are highly disputed and failed to repaythe required bank loan repayments.

The last independent macro variable islending rate. The mean value of lending rate was 11.65% and this is the loweststandard deviation of 0.8%.

The lending rate of the country over the past ten yearswas recorded from 12.75% to 10.5%.This highly stable lending rate implies thatthe banks profit increased and has a positive impact for the country’s economicgrowth. A1Areyou sure the study is yours A2 A2Areyou sure the study is yours


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