Asset quality, non-interest income, and bank profitability: Evidence from Indian banks

2017 ◽  
Vol 63 ◽  
pp. 1-14 ◽  
Author(s):  
M. Mostak Ahamed
Keyword(s):  
Bank Profitability ◽  
Interest Income ◽  
Indian Banks ◽  
Asset Quality

scholarly journals A Study on Financial Performance of the Jordanian Commercial Banks using the CAMEL Model and Panel Data Approach

2020 ◽  
Vol 9 (4) ◽  
pp. 111-130
Author(s):  
Jamil Al Zaidanin
Keyword(s):  
Commercial Banks ◽  
Negative Relationship ◽  
Capital Adequacy ◽  
Primary Data ◽  
Quality Level ◽  
Financial Reports ◽  
Interest Income ◽  
Lending Policy ◽  
Performance Determinants ◽  
Asset Quality

The purpose of this research paper is to extensively investigate and examine the effect of the CAMEL model variables on the profitability and financial soundness of the thirteen Jordanian commercial banks for the period of 2013 to 2019, the primary data were collected from the published audited financial reports of the Jordanian commercial banks. The study uses CAMEL model variables of Capital adequacy, Asset Quality, Management efficiency, Earnings ability, and Liquidity management to rank banks as per their overall performance and measuring their effect on banks’ profitability measures of Return on Assets and Return on Equity separately through applying the fixed effect regression model. It is concluded that the ranking approach shows that Bank of Jordan was in the top position followed by the Capital Bank of Jordan. Jordan Ahli Bank was in the lowest rank in most positions. Furthermore, the empirical results indicates that Non-Interest Income to Total Assets and Net Interest Income to Total Loans and Advances have significant positive relationships with both profitability measures whereas cost to Total Income and Non-Interest Income to Total Assets have strong negative relationships with the profitability measures. In addition, Equity to Total Assets has strong negative relationship with ROE. The study suggests that Jordanian commercial banks can improve their profitability through the concentration on main activities, efficiently managing their capital adequacy, maintaining high quality level of lending policy, and utilization of full assets. Additionally, the current study recommends conducting more studies on banks’ performance determinants with an expanded scope and using more financial models besides the CAMEL model.

Corporate Debt Vulnerability and Non-performing Assets in India

2020 ◽  
pp. 097215092093575
Author(s):  
K. Dhananjaya
Keyword(s):  
Banking Sector ◽  
Global Financial Crisis ◽  
Corporate Debt ◽  
Sales Growth ◽  
Bank Profitability ◽  
Balance Sheets ◽  
Public Sector Banks ◽  
Bank Balance Sheets ◽  
Asset Quality

This article examines the increasing corporate debt vulnerability and its impact on the asset quality of the Indian public sector banks (PSBs) in the post-global financial crisis (post-GFC) of 2008. The study shows that the stress in both corporate and bank balance sheets has increased in the post-GFC. As a result, there has been a steep increase the proportion of firms with negative profitability. The article finds that the declining profitability has severely affected the debt serviceability of the firms. Consequently, the debt at risk has risen significantly, which in turn has contributed to increase in non-performing assets (NPAs) of the banking sector, particularly, the PSBs. Using the panel regression technique, the study finds that the corporate debt vulnerability is an important determinant of the growth of NPAs along with other factors such as debt concentration, corporate sales growth, lending to sensitive sectors, bank profitability, bank size and the efficiency of banks.

Differentiating Adopters and Non-adopters of Smart Cards: Comparative Analysis of Public, Private and Foreign Sector Banks in India

2013 ◽  
Vol 38 (3) ◽  
pp. 67-78
Author(s):  
Kamalpreet Kaur ◽  
Mandeep Kaur
Keyword(s):  
Smart Card ◽  
Banking Sector ◽  
Smart Cards ◽  
Payment Systems ◽  
Progressive Development ◽  
Reserve Bank ◽  
Financing Pattern ◽  
Indian Banks ◽  
Asset Quality ◽  
Different Characteristics

Progressive development in the field of information technology (IT) has brought in remarkable changes in the products as well as methods of payment and settlement system in the banking sector. In India, various types of payment systems are functioning apart from the traditional payment systems where the instruments are physically exchanged and settled manually. Smart cards are a new form of retail payment instrument, installed to facilitate retail transactions through electronic means. In 1999, the Reserve Bank of India issued guidelines to the banks regarding introduction and usage of smart cards. Smart cards are currently being issued by several banks in India which have tied up with Financial Information Network and Operations Ltd. (FINO). The IDBI bank has introduced its smart card called MoneySmart; Corporation Bank has issued CorpSmart; and Bank of India has issued its e-purse cards. PNB, SBI, ABN Amro, ICICI Bank, Bank of Baroda and some other banks have also launched smart card-based banking solutions (Kaur & Kaur, 2008). The main objective of this study is to identify the factors that may vary between the adopters and the non-adopters of smart cards in Indian banks. Banks that have adopted the cards may have different characteristics from those that have not yet adopted the cards. In other words, with the exploration of various characteristics of the banks, the study tries to differentiate between the adopter and non-adopter categories of the banks regarding smart cards with respect to their profitability, size, competitive advantage, efficiency, asset quality, financing pattern, diversification, cost of operations, etc. The empirical results evidently reveal that the banks providing smart cards differ in their characteristics from that of the banks that have not yet adopted it. It shows that the banks that adopted smart cards are larger in size, more efficient, pay lesser wages, and have more industry advantage and thus, in terms of some characteristics, outperform the non-adopter banks.

scholarly journals DETERMINANTS OF FINANCIAL PERFORMANCE OF DEPOSIT-TAKING MICROFINANCE INSTITUTIONS AND CO-OPERATIVE SOCITIES THAT HAVE FRONT OFFICE SERVICE ACTIVITIES REGISTERED WITH SASRA.

2017 ◽  
Vol 1 (3) ◽  
pp. 118
Author(s):  
ONGAKI K. BELYDAH ◽  
Dr.Ondigo Herick
Keyword(s):  
Financial Performance ◽  
Positive Relationship ◽  
Profit Margin ◽  
Microfinance Institutions ◽  
Expense Ratio ◽  
Interest Income ◽  
Service Activities ◽  
Income Ratio ◽  
Front Office ◽  
Asset Quality

Purpose: The study aimed to examine thedeterminants of financial performance of deposit-taking microfinance institutions and co-operative societies that have front office service activities financial performance of portfolios of investment firms in Kenya.Methodology:The research design was descriptive survey. The study used a sample of 11 Sacco FOSAs and 6 DTMs. Secondary data spanning three years (2009 to 2011) was used.  A regression model was used to establish determinants of financial performance of deposit-taking microfinance institutions and co-operative societies that have front office service activities financial performance of portfolios of investment firms in Kenya.Results:This study concludes that there is a positive relationship between profit ratio and interest income ratio. Therefore, an increase in interest income ratio by   leads to an increase in profit margin. This study concludes that there is a positive relationship between profit ratio and non-interest income ratio. An increase in noninterest income ratio leads to an increase in profit margin. This study concludes that results there are a negative relationship between profit ratio and noninterest expense ratio. An increase in noninterest expense ratio leads to a decrease in profit margin.  Regression results indicate that there is a negative relationship between profit ratio and liquidity ratio. An increase in liquidity ratio leads to a decrease in profit margin.  Regression results in indicate that there is a positive relationship between profit ratio and asset quality ratio. An increase in asset quality ratio leads to an increase in profit margin. The study concluded that t there is a positive relationship between profit ratio and financing ratio. An increase in asset financing ratio to an increase in profit margin.Policy recommendation:This study recommends that  financial institutions should improve the interest income ratio by aggressive  marketing their loans products and expanding their market territory. They should also improve non-interest income ratio, non-interest expense ratio, financing ratio, liquidity ratio and asset quality ratio

scholarly journals Income Diversification and Bank Stability: Evidence from India

2018 ◽  
Author(s):  
Navneet Kaur ◽  
Santosh Srivatsav ◽  
Nemiraja Jadiyappa ◽  
Parneet Kaur
Keyword(s):  
Cross Validation ◽  
Convex Combination ◽  
Idiosyncratic Risk ◽  
Tuning Parameters ◽  
Indian Context ◽  
Interest Income ◽  
Regression Techniques ◽  
Optimal Values ◽  
Indian Banks ◽  
Fold Cross Validation

Modern portfolio theory claims that diversification into non-correlated or negatively correlated activities reduces the overall risk of a portfolio. Considering the total income of a bank as a portfolio of interest income and non-interest income, this paper investigates how the variability of interest income and non- interest income, and covariance between interest income and non-interest income influence the various risk factors of banks. We set out a study in the Indian context. We have extracted data for the period 2005-2017 and employed an extended version of Ridge, Lasso and Elastics Net regression to take care of multi-collinearly in our data. We have considered 10-fold cross-validation techniques to get optimal values of tuning parameters for Ridge, Lasso, and Elastics Net regression (which is a convex combination of ridge and the LASSO). We have compared different regression techniques by comparing RMSE and R2. We observe that non-interest income is positively correlated with interest income in the Indian context, but it does stabilize variance, idiosyncratic risk & market risk (Beta) of Indian Banks.

Impact of board size on the accounting returns and the asset quality of Indian banks

2020 ◽  
Vol 62 (4) ◽  
pp. 297-313
Author(s):  
Ankur Shukla ◽  
Sivasankaran Narayanasamy ◽  
Ramachandran Krishnakumar
Keyword(s):  
Robust Regression ◽  
Positive Impact ◽  
Ordinary Least Squares ◽  
The Body ◽  
Board Size ◽  
Content Type ◽  
Indian Banks ◽  
Asset Quality ◽  
The Impact

Purpose The purpose of the paper is to explore the impact of board size on the accounting returns and asset quality of Indian banks. Design/methodology/approach This paper uses ordinary least squares regression, robust regression and panel data methods for estimation, based on data collected for a sample of 29 Indian banks that are listed on the National Stock Exchange (NSE) and form part of the NSE-500 index over a period of eight financial years 2009-2016. The data pertaining to the board size of the sample banks is collected from the annual reports of banks, whereas the data relating to return on assets (ROA) and ratio of the gross non-performing assets to total assets and control variables (bank age and bank size) is extracted from ACE Equity database. Findings This paper concludes that the size of the governing board has a positive impact on the accounting returns (measured through ROA) of the Indian banks. Further, board size is observed to be insignificant in determining the asset quality of Indian banks. Originality/value This paper contributes to the literature and practitioners in a number of ways. First, to the best of the authors’ knowledge, this is the first study on the impact of board size on the accounting returns and asset quality of Indian banks. The findings of the study contribute new theoretical insights to the body of knowledge on the influence of the size of the board, which may be useful for future researchers. Second, banks may enhance their financial performance by taking cognizance of the findings of this study. Finally, equity investors may make use of the findings of this article in deciding on whether to invest in a bank’s stock/lend to the bank based on board size of the bank.

Diversification of Bank Profitability and Bankruptcy Risk in ASIA

2021 ◽  
Vol 1 (1) ◽  
pp. 47-52
Author(s):  
Jatmika Yudha Utama ◽  
◽  
Budi Sasongko
Keyword(s):  
Financial Crisis ◽  
Generalized Method Of Moments ◽  
Bank Profitability ◽  
Bankruptcy Risk ◽  
Subprime Mortgage ◽  
Interest Income ◽  
Mortgage Crisis ◽  
Banking Business ◽  
Interest Margins ◽  
Cash Inflow

This study aims to determine the bank interest margin and non-interest income in 25 countries in ASIA in the study period 1993 and 2020. This study uses the quantitative method Generalized Method of Moments (GMM). Prudence in developing the banking business by banking business actors is essential in preventing a systemic financial crisis in the future, such as the experience of the Asian financial crisis in 1997 and the subprime mortgage crisis in 2008. Bank interest margins and non-interest income are both required in maintaining bank cash inflow.

CAMEL RATIO ON PROFITABILITY BANKING PERFORMANCE (MALAYSIA VERSUS INDONESIA)

2017 ◽  
Vol 3 (1) ◽  
pp. 30-39
Author(s):  
Maryam binti Badrul Munir ◽  
Ummi Salwa Ahmad Bustamam
Keyword(s):  
Capital Adequacy ◽  
Return On Assets ◽  
Comparative Performance ◽  
Bank Profitability ◽  
Return On Equity ◽  
Short Period ◽  
Equity Ratio ◽  
Asset Quality ◽  
Descriptive Method ◽  
Interest Expense

Purpose: This research analyzed about profitability banks performance based on the CAMEL (Capital Adequacy, Asset Quality, Management, Earnings and Liquidity) on the Bank's profitability. Capital adequacy measured by debt equity ratio (DER) and non-performing loans (NPL), asset quality measured by return on assets (ROA), management will be measured by cost per income, earnings measured by return on equity (ROE) and liquidity measured by interest expense and deposit.Methodology: The samples were 114 samples (from 10 bank in Malaysia and 9 bank in Indonesia) since 2010-2015. This analysis used descriptive method and multiple regression analysis, the result of this research indicated that banking profitability have a good performance based on CAMEL analysis.Findings: From the results of regression, the CAMEL analysis has a significant relationship to the bank profitabilityPractical Implications: The study demonstrated the use of CAMEL analysis to measure bank profitability. If bank performance declining through the CAMEL analysis so the Bank should make a decision to make a better performance changes of banking.Social Implications: This study was about the importance of camel analysis measuring the performance banking. CAMEL analysis detected the decrease in performance in any business sector.Originality/Value: This analysis adapted and adopted the study conducted by Sahut and Mili(2011), but this study focusedonly on the comparative performance between conventional and Islamic banking between Malaysia and Indonesia.Research Limitations/Implications: Comparison of CAMEL analysis focused on two countries between Malaysia and Indonesia (it also involves the comparative analysis of conventional and Islamic bank) to gain the profitabilityof banking, ROI with short period since 2010 until 2015

Structure, Conduct and Performance Analysis of Indian Commercial Banks

2016 ◽  
Vol 5 (2) ◽  
pp. 157-185 ◽  
Author(s):  
Ratna Barua ◽  
Malabika Roy ◽  
Ajitava Raychaudhuri
Keyword(s):  
Commercial Banks ◽  
Structural Changes ◽  
Banking Sector ◽  
Negative Relationship ◽  
Market Concentration ◽  
Jel Classification ◽  
And Performance ◽  
Indian Banks ◽  
Asset Quality ◽  
The Impact

The market structure, conducts and performance of the Indian banking sector have changed since the introduction of banking sector reforms. Slower economic growth, coupled with asset quality problems in recent years, has taken a toll on the overall health of the Indian banking sector. Higher statutory capital requirement under Basel III has posed another major challenge to the Indian banks. The purpose of the study is to examine the impact of structural changes and conduct of Indian commercial banks on their profitability in the paradigm of structure–conduct–performance (SCP) framework. Market concentration, bank-specific/macroeconomic variables have been considered as important determinants of the profitability. The regression results find a negative relationship between profitability and market concentration and reject SCP hypotheses. The study found that capitalization, credit risk, leverage and ownership structure are the most important determinants of the profitability of Indian banks. The study also found that financial crisis had no significant impact on the profitability of Indian banks. JEL Classification: C4, G21, G28, L19

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