Determining the Relationship between Credit Risk & Profitability in Iranian Banks

• Main Authors: Saeed Shavvalpour, Elham Ashari
• Format: Article
• Language: fas
• Published: University of Tehran 2013-10-01
• Series: تحقیقات مالی
• Subjects: credit risk; loan loss provision; non-performing loans; profitability
• Online Access: https://jfr.ut.ac.ir/article_51079_f41c0790be53038682a85cbee5f025b2.pdf
• ISSN: 1024-8153; 2423-5377

In this paper we analyze the relationship between credit<br />risk & profitability in Iranian banks. The credit risk is measured by<br />non-performing loans ratio &loan loss provision ratio. Also, the<br />profitability has been measured by return on assets &return on equity.<br />The survey data are from fifteen Iranian banks& credit institutes<br />during the time period of 2003 to 2009.Results show that there is a<br />significant negative relationship between credit risk & profitability. In<br />other words, the increase in credit risk results in the increase in the<br />costs of banks and therefore the decrease in their profibility. The<br />results also imply that bank managers need to focus on monitoring and<br />controlling the credit risk in order to maximize their profit.