Analysis of impact of non-performing loan (NPL) on banking performance of AB bank.

Abstract

I have presented a report explaining the impact of NPL on banking performance of AB Bank. To find out the effect NPL of banking industry on the financial performance of the bank, I have mainly used secondary data from published sources and have gathered financial data regarding NPL for last 5 years I have made statistical test along with ratio analysis to measure the impact on the financial performance of the bank and has shown that non-performing loans in these banks are on the rise and every year the rate of loan default is increasing at an alarming rate. AB Bank is highly responsible for a bad NPL scenario in banking industry of the country as a significant portion of total NPL is incurred by these banks. In order to show the impact of NPL on banking performance of AB Bank, linear regression equation was used and secondary data for the periods from 2013 to 2017 was used. The independent variables of the study were Return on Asset, Return on Equity,Return on Investment, Net profit margin, Debt to income ratio, Debt to equity ratio, Debt to asset ratio, Total NPLs to Total Loans ratio .Previous studies have shown that there is an inverse relationship between NPL and performance of banks. Keeping that outcome in mind, the regression outcomes suggest that NPL significantly affects performance of SOBs in Bangladesh. From this study of regression analysis it has been found that NPL has significant impact on Return on Asset, Net Profit Margin, Debt to Asset ratio, Total NPLs to Total Loan ratio It has also been found through regression analysis that NPL has less significant impact on Return on Equity,less impact on Net Profit Margin to NPL and less impact on Return on Investment.