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International Journal of Business and Public Management (ISSN: 2223-6244) Vol.

2(2): 72-80
Available online at: http//:www.journals.mku.ac.ke
MKU Journals, April 2012

Full Length Research Paper

The impact of credit risk management on the financial


performance of Banks in Kenya for the period
2000 2006
Danson Musyoki1, Adano Salad Kadubo2
Catholic University of Eastern Africa P.O. Box 00200 62157 Nairobi
2
Catholic University of Eastern Africa P.O. Box 00200 62157 Nairobi
1

Corresponding Author: Danson Musyoki


Recieved: August 8, 2011

Accepted: September 7, 2011

Abstract
The objective of study was to assess various parameters pertinent to credit risk management as it affects
banks financial performance. Such parameters covered in the study were; default rate, bad debts costs
and cost per loan asset. Financial reports of 10 banks was used to analyze profit ability ratio for seven
years (2000-2006) comparing the profitability ratio to default rate, cost of debt collection an cost per
loan asset which was presented in descriptive, regression and correlation was used to analyze the data.
The study revealed that all these parameters have an inverse impact on banks financial performance,
however the default rate is the most predictor of bank financial performance vis--vis the other indicators of credit risk management. The recommendation is to advice banks to design and formulate strategies that will not only minimize the exposure of the banks to credit risk but will enhance profitability
and competitiveness of the banks.
Keywords: Return on assets, Cost per loans, Default rate, Bad debts cost
JEL Classification: G0

INTRODUCTION
Financial performance is companys ability to generate new
resources, from day- to- day operations, over a given period of
time; performance is gauged by net income and cash from
operations. A portfolio is a collection of investments held by an
institution or a private individual (Apps, 1996).Risk
management is the human activity which integrates recognition
of risk, risk assessment, developing strategies to manage it, and
mitigation of risk using managerial resources.( Apps, 1996).
Whereas Credit risk is the risk of loss due to a debtors nonpayment of a loan or other line of credit(either the principal or
interest (coupon) or both) (Campel, et. al., 1993) default rate is
the possibility that a borrower will default, by failing to repay
principal and interest in a timely manner (Campel, et. al.,
1993). A bank is a commercial or state institution that provides
financial services, including issuing money in various forms,
receiving deposits of money, lending money and processing
transactions and the creating of credit (Campel, et. al., 1993).

management modeling. The case in point is the Basel 11


accord. There is need to investigate whether this investment in
credit risk management is viable to the banks. This study
therefore seeks to investigate the impact of credit risk
management on a banks financial performance in Kenya. The
general objective of the study was to establish the impact of
credit risk management on the financial performance of banks.
The specific objectives were: to establish the impact of default
rate on performance; to establish the impact of debt collection
cost on perforce, and; to establish the impact of cost per loan
asset on performance
The study covered the banks operating in Nairobi; ten banks
were involved in the study. All the banks have offices in the
central business district. The study was based in Nairobi
because the banking activities cover all sectors of the Kenyan
economy and are a cosmopolitan town. The study covered the
period between 2000 and 2006 because this was the period that
the banking industry had undergone various changes from
periods of high interest rates in 2000 to low interest rates in
2006.

Credit risk management is very important to banks as it is an


integral part of the loan process. It maximizes bank risk,
adjusted risk rate of return by maintaining credit risk exposure
with view to shielding the bank from the adverse effects of
credit risk. Banks are investing a lot of funds in credit risk

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International Journal of Business and Public Management (ISSN: 2223-6244) Vol. 2(2): 72-80

LITERATURE REVIEW
Donald et al. (1996) defines Credit risk simply as the potential
that a bank borrower or counterpart will fail to meet its
obligations in accordance with agrees terms. The goal of credit
risk management is to maximize a banks risk- adjusted rate of
return by maintaining credit risk exposure within acceptable
parameters. Banks need to manage the credit risk inherent in
the entire portfolio as well as the risk in individual credits or
transactions. Banks should also consider the relationships
between credit risk and other risks. The effective management
of credit risk is a critical component of a comprehensive
approach to risk management and essential to the long-term
success of any banking organization.

requirements. However, it is no substitute whatsoever for


designing a business risk strategy. Banks will have to decide
what their risk appetite is , how to allocate their resources
optimally and in what markets to compete. The dramatic
increase in loan velocity and secondary market activity, such as
in credit derivatives, implies that the old paradim has been
turned upside down. A bank will not necessarily have to hold
onto the loans until maturity, but can sell off the risk. This
allows much more efficient risk transfer and portfolio
optimization.
However, to do this effectively, banks must have a deep
understanding of risk management, knowing how to price their
loans on a market to market basis, knowing what the marginal
risks adjusted contribution of each loan is and being able to
allocate measure and monitor economic capital (Cuthbertson
and Nitzsche (2003).

According to Nelson and Schwedt (2006) the banking industry


has also made strides in managing credit risk. Until the early
1990s, the analysis of credit risk was generally limited to
reviews of individual loans, and banks kept most loans on their
books to maturity. Today, credit risk management encompasses
both loans reviews and portfolio analysis. Moreover, the
development of new technologies for buying and selling risks
has allowed many banks to move away from the traditional
book and hold lending practice in favor of a more active
strategy that seeks the best mix of assets in light of the
prevailing credit environment, market conditions, and business
opportunities. Much more so than in the past, banks today are
able to manage and control obligor and portfolio
concentrations, maturities, and loan sizes, and to address and
even eliminate problem assets before they create losses. Many
banks also stress test their portfolios on a business line basis to
help inform their overall management.

In Kenya the Central bank has been involved in initiatives


aimed at transforming the approach used for conducting its core
mandate of supervision and regulation of banks to make it
more risk focused, significant steps have been made towards
implementation of risk based supervision. Inspection
procedures and report formats have been modified, and the
Central Bank received Risk Management programs (RMPs)
from all institutions as required of them (Ngugi , 2001 ).
Ngugi, (2001) postulates that in order to determine the needs of
the local banking sector with regard to risk management, the
central bank of Kenya conducted a survey in September 2004
that would provide a status position on the extent to which risk
management is practiced in the financial institutions operating
in Kenya. The survey revealed that there is a high level of
awareness in banking institutions on the importance of
employing systematic methods of identifying, analyzing and
controlling or mitigating risks (Cuthbertson and Nitzsche
2003).

There are three stages in the credit process: the first is the
simple risk control of the business avoiding being over
concentrated in any one sector, estimating the probability of
defaulting and assessing recovery. The second phase is the link
between economic capital and return. Clearly banks would like
to set minimum rates of return they expect to earn on their
portfolios after provisioning. The link between economic profit
and risk is the next stage in advancing the practice of credit risk
management. Finally the third stage is when risk management
is used as a strategic management tool to align RAROC (Risk
Adjustment Returns on Capital) with ROE (Return on Equity).
Each bank must understand what drives the share price of the
bank and thus must understand the link between economic
capital, intellectual property owners IPOs (Intellectual Property
Owners) and ROE. Once this paradigm is understood, banks
will be in a better competitive position to compete more
aggressively and likely service in the next decade (Lawrence,
2006). Success in credit risk management has a highly visible
impact on the results of the firm. For the management of credit
risk a profit and return focused activity within our broad base
of businesses.

Kenyas Central Banks concern has not only been over the low
level of risk management in the banks, but also in the fact that
those who do only concentrate on credit risk. This means the
eyes of the entire banking sector has handily been on
operational market liquidity, and reputation among other risks.
But even as banks are being pushed to comply with the
provisions of Basel I, some analyst think that too many
technological financial and institutional changes have occurred
making it necessary to raise the bar. The CBK itself took more
than 15 years to operationalise the Basel I accord having
established risk mitigation guidelines only in 2005 following a
banking sector survey it conducted in 2004. Concerns over the
relevance of Basel I has seen the CBK contemplate moving a
rung higher to implement the more advanced Basel 2
framework that was agreed in June 1999.
Benedikt, Marsh, Vall and Wagner (2006), examined credit risk
management policies for ten banks in the united states using a
multivariate model and found that banks that adopt advanced
credit risk management techniques (proxies by the issuance of
at least one collateralized loan obligation) experience a
permanent increase in their target loan level of around 50%.
Partial adjustment to this target, however, means that the
impact on actual loan levels is spread over several years. The
findings confirm the general efficiency- enhancing implications

According to Cuthbertson and Nitzsche (2003), risk


management technology has been transformed over the last
decade. The speed of information flow and the sophistication of
the international financial markets enable banks to identify,
assess, manage and mitigate risk in a way that was just not
possible ten years ago. The most current credit modeling
software in place is Basel 11 Accord. This accord has certainly
been a catalyst in spearheading the drive towards building
appropriate credit risk modeling and capital adequacy

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International Journal of Business and Public Management (ISSN: 2223-6244) Vol. 2(2): 72-80
of new risk management techniques in a world with frictions
suggested in the theoretical literature.

of pro- cyclicality, and the reduced emphasis on the third pillar,


i.e. market discipline. The study therefore recommended that
European authorities apply the substance of the Basel II
advanced approach only to very large internationally active
banks. Remaining banks would have the opinion of a simplified
standardized approach.

The Macaulay (1988) investigated the adoption of credit risk


management best practices in the United States and reported
that over 90% of the banks in that country have adopted the
best practices. Effective credit risk management has gained an
increased focus in recent years, largely due to the fact that
inadequate credit risk policies are still the main source of
serious problems within the banking industry. The chief goal of
an effective credit risk management policy must be to
maximize a banks risk adjusted rate of return by maintaining
credit exposure within acceptable limits. Moreover, banks need
to manage credit risk in the entire portfolio as well as the risk in
individual credits transactions.

METHODOLOGY
The research design used for the study was a descriptive
research design that basically involve obtaining information
concerning the current status of the phenomena to describe,
What exists with respect to variables or conditions in a
situation (Gardner et al 2004). This design was appropriate for
this study, as it gave the relevant information as it was. The
population of interest was the 48 banks that operate in Kenya.
For the purpose of this study only a bank is an institution
registered with the Kenya Bankers Association (KBA, 2006).
The study employed simple random sampling inorder to pick
10 banks. Simple Random sampling is sampling procedure that
assurers that each element in the population has an equal
chance of being selected. A sample of 10 banks was used in the
study. This constitutes 20.8 percent of the total population.

The bank of Jamaica conducted an empirical study on the


implementation of credit risk management policies by
commercial banks in that country. The study which involved all
the 73 banks in that country found out that only 46% had
implemented them in full. This was partly attributed to the poor
way in which the regulations had been communicated. Credit
policies establish the framework for lending and reflect an
institutions credit culture and ethical standards. To be
effective, policies must be communicated in a timely fashion,
be implemented through all levels of the organization by
appropriate procedures and revised periodically in light of
changing circumstances. The foundation of an effective credit
risk management programme is the identification of the
existing and potential risks inherent in an institution and the
parameters under which credit risk is to be controlled. Pressure
for increased profitability, marketing considerations and a
vastly more complex financial environment have resulted in
innovative credit instruments and approaches to credit.
Measuring the risks attached to each credit activity permits the
determination of aggregate exposures to counterparties for
control and reporting purposes, concentration limits and risks/
reward returns.

Secondary data was used for the study. The data was analyzed
by calculating the profit ability ratio for each year for the
period of study, trend analysis was done by comparing the
profitability ratio to default rate, costs of debt collection and
cost per loan asset. Further, the ratio were analysed using
regression statistical tool run using SPSS programmes version
eleven.
Definition of Variables
The return on Assets (ROA) is a ratio that measures company
earnings before interest & taxes (EBIT) against its total net
assets. The ratio is considered an indicator of how efficient a
company is using its assets to generate before contractual
obligation must be paid. It is calculated as: ROA= EBIT/ Total
Assets. Return on assets gives an indication of the capital
intensity of the banking industry, which will depend on the
industry; banks that require large initial investment will
generally have lower return on assets (Apps, 1996).

Privately owned banks are more likely to implement credit risk


management polices than state owned banks. Kuo and Enders
(2004) investigated credit risk management policies for state
banks in china using a survey research design. The study found
out that with the increasing opening of the financial market, the
state owned commercial banks in china are faced with the
unprecedented challenges. As the core of national finance and
vital of national economy, the state owned commercial banks
could not rival with foreign banks unless they make profound
changes. And the reform of credit risk management is a major
step that determines whether the state owned commercial banks
in china would survive the challenges or not.

Default rate (DR) is the term for a practice in the financial


services industry for a particular lender to change the terms of a
loan from the normal terms to the default terms that is, the
terms and rates given to those who have missed payments on
loan (Apps 1996). DR ratio can be calculated as Dr Ratio= Non
Performing Loans/ Total loan
Bad Debt Cost is created when a bank agrees to lend a sum of
assets to a debtor and granted with expected repayment; in
many cases, however the debtor is unable to repay the debt at
the fixed period of time by a certain date. In addition, changes
in the valuation of debt currency change the effective size of
the debt due to inflation or deflation, even though the borrower
and the lender are using the same currency. Consequently, this
can lead to bad debt cost. Bad debt cost includes lawyers fees,
consultancy fees & commissions to auctioneers. (Apps, 1996).
Bad debt costs ratio can be calculated as: BDC Ratio= Bad debt
cost/ Total cost.

Research however faults some of the credit risk management


policies in place. The European shadow Financial Regulatory
Committee (ESFRC) (2007) researched on the impact of a
basel (ii) accord by conducting a survey of 93 banks and
presented findings that objected to the highly complex
approach of the draft New Basel Capital Accord (Basel II). It
considered it to be excessively focused on the regulation of risk
management by individual banks. In addition, it also objected
to the treatment of operational risk, the politically influenced
issues around lending to the small and medium sized
enterprises (SMEs), the insufficient consideration of the issue

Cost per loan asset (CLA) is the average cost per loan advanced
to customer in monetary term. Purpose of this is to indicate

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International Journal of Business and Public Management (ISSN: 2223-6244) Vol. 2(2): 72-80

efficiency in distributing loans to customers. (Apps, 1996)


CLA ratio can be calculated as : CLA Ratio= Total Operating
Cost/ Total amount of loans.

The constant indicating (6.110) indicates the banking


environment within which banks operate in Kenya.

FINDINGS
In this section the data collected for seven year (200-2006)
from ten banks have been analyzed using SPSS programme,
however much details are shown in appendix I. the selected
banks are: Kenya commercial Bank Ltd (KCB), Barclays Bank
Of Kenya (BBK), Consolidated Bank, CFC Bank, Equity Bank,
Standard Chartered Bank (Stan Chart), Cooperative Bank (Coop Bank), National Bank Of Kenya (NBK), Diamond trust
Bank (DTB) and NIC Bank

CONCLUSIONS AND RECOMMENDATIONS


The general objective of the study was to establish the impact
of credit risk management on financial performance of banks,
and the specific objectives were to establish impact of default
rate, bad debt cost per loan asset on bank financial
performance. The result of the showed that credit risk
management is an important predictor of bank financial
performance thus success of bank performance depends on risk
management to the extent of around 36%. The study results
also showed that default rate as one of the risk management
indicator is a major predictor of the bank financial performance
to the extent of 54% and followed by bad debt cost at 9.3% and
lastly slightly influenced by cost per loan asset up to 3.7%.
Credit risk management is crucial on the banks performance
since it have a significant relationship with bank performance
and contributes up to 35.6 % of the bank performance Among
the risk management indicators Default Rate management is
the single most important predictor of the bank performance
since it influences 54% of the total credit risk influence on bank
performance.

All the tests for significance were done at 95% confidence


level, this means that all the above tests must have p- value less
or equal to 0.05 for the tests to be significant. Table 2 shows
correlations between the dependent variables and the
independent variables. It shows that there is a significant
relationship between return on assets and the default rate (r=
0.590, P= 0.00), the relationship between return on assets and
bad debts cost (r= 0.318, p= 0.04) is also significant and the
cost per loan assets also showed significant relationship with
the return on assets. This finding therefore indicates that all the
risk management indicators have direct relationship with
performance.

Risk management indicators such as Bad Debt Cost and Cost


per Loan Asset are not significant predictors of bank
performance.

Table 5 contains the beta coefficients of the three independent


variables. The beta coefficients are indicators of the predictive
powers of the individual independent variables.

Since risk management in general has very significant


contributions (35.6%) to banks performance, the banks are
advised to put more emphasis on risk management. In order to
reduce risk on loans and achieve maximum performance the
banks need to allocate more funds to default rate management
and reduce spending on bad debt cost and cost per loan asset.
Based on the study other factors not studied in this research has
a very significant contribution of 64.4% to bank performance
therefore require further research to efficiently manage the
credit risk hence improve bank financial performance.

All the beta coefficients are negative, implying an inverse


relationship between the dependent variable and the
independent variables. Thus a unit change in default rate, bad
debt, and cost per loan asset result to an inverse change in
performance to the extent of 54%, 9.3% and 3.7% respectively.
Theoretical Model equation
Y= +1X1+ 2X2+ 3X3+

REFERENCES

Where:
Y= Return On Assets (RoA) ( The Dependent Variable)
= Constant Term
= Beta Coefficient
X1= Default Rate (DR)
X2= Bad Debts Cost (BDC)
X3= Cost per Loan Asset (CLA)
= Error term

Apps. R, 1996. The Monetary and Financial System. London,


Bonkers Books Ltd, 3rd Edition.
Campbell, John Y and Hamao, Yasushi, 1993. The Interest
Rate Process and the Term Structure of Interest Rates
in Japan. Kenneth J. Singleton, ed., Japanese
Monetary Policy, NBER Monograph, Chicago:
University of Chicago Press. pp. 95-120.
Central Bank of Kenya, 1986. Central Bank of Kenya; its
evolution, responsibilities and organization. Central
Bank of Kenya Quarterly Economic Review.
Cuthbertson, K. and Nitzsche, D., 2003. Long Rates, Risk Premia
and the Over-Reaction / Hypothesis. Economic
Modelling. Vol 20, pp 417-435, (2003).
Donald E. Fisher & Ronald J. Jordan, 1996. Security Analysis
and portfolio management. New Delhi, India.
Prentice Hall of India Private Limite., 6th Edition.
Gardner M. J., Dixie L. Mills & Elizabeth S. Cooperman, 2004.
Managing Financial Institutions. An Asset Liability
Approach, New York. The Dryden Press A division of
Harcourt College Publisher. 4th Edition.

Equation Modeling
Y= 3.425- 0.540 X1- 0.093 X2- 0.037X3 +
Observation of the t-test for the default rate (-4.729) indicate
that the null hypothesis is rejected therefore there is a
significant negative relationship between default rate and return
on assets (performance) of the banks.
Default rate has the most significant and negative relationship
with bank performance, costs per loan and bad debts cost has t
values of -0.359 and -0.0853. However they are not significant
as far as bank performance is concerned, we failed to reject the
null hypothesis. Its noted both variables (cost per loan and bad
debts cost are negatively not significant)

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International Journal of Business and Public Management (ISSN: 2223-6244) Vol. 2(2): 72-80

Kuo, S. H. and Enders, W. 2004. The term structure of


Japanese interest rate: The equilibrium spread with
asymmetric
dynamics.
The
Japanese
and
International Economies. Vol 18, pp 84-98,
Macaulay, F.R. 1988. Some theoretical problems suggested by
the movements of interest rates, bond yields, and
stock prices in the Unites States since 1856. New
York: NBER.

Nelson, C.R. and G. W Schwert, 2006. Short-term Interest


Rates As Predictors of Inflation On Testing the
Hypothesis that the Real Rate of Interest is Constant.
American Economic Review. 67, p. 478-86.
Ngugi R. W. 2001. An Empirical Analysis of Interest Rate
Spread in Kenya. African Economic Research
Consortium (AERC) Research Paper No. 106.

APPENDICES
Table 1 Descriptive Statistics
Return On Assets
Default Rate
Bad Debts Cost
Cost per Loan Asset

mean
1.416
16.412
19.575
22.490

Std. Deviation
2.343
13.326
14.358
12.978

Table 2
Person
Correlation

Correlations
Return On
Assets
Return On Assets
Default rate
Bad debts
Cost per Loan Asset
Return On Assets
Default Rate
Bad debt cost
Cost per loan Asset
Return On Assets
Default Rate
Bad Debt Cost
Cost per loan Asset

Sig.(1- tailed)

Table 3 Model Summary


R
R Square

.569 (a)

.356

Adjusted
Square

.326

1,000
-.590
-.318
-.192
.000
.004
.056
70
70
70
70
R

Std. Error of
the estimate

1.9230

R
square
change
.356

N
70
70
70
70
Default
Rate
-.590
1.000
.415
.285
.000
.000
.008
70
70
70
70
70

Bad
Debt
Cost
-.318
.415
1.000
.005
.004
.000
.
.482
70
70
70
70

Cost
per
Loan Asset
-.192
.285
.005
1.000
.056
.008
.482
.
70
70
70
70

F Change

Df1

Df2

Sig.
F
Change

12.139

66

.000

Predictors: (Constant), cost per loan Asset, bad debt cost, default rate
According to the F statistics below the variables used in the model fits well in the model. The model shows that the three risk
management indicators combine have a significant relationship (R= 0.596, P=0.00) with performance. It is also shows that they can
predict up to 32.6% of the variance in performance.
Table 4 ANOVA

Sum of Squares
df
Mean Square
F
Sig.
Regression
134.670
3
44.890
12.139
.000(a)
Residual
244.071
66
3.698
Total
378.741
69
Predictors:(Constant), cost per loan Asset, Bad Debt Cost, Default Rate Dependent Variables: Return On Assets.
The table above shows the ANOVA test of the fitness of the model. With an F statistics of 12.139 and p= 0.00, shows that the data
fits the model well and this indicates that the variables specified in the model are actual predictors of performance.
Table 5
Model
(Costant )

Coefficients (a)
Unstandardized Coefficients
B
3.425

Std. Error
.561

Standardized
Coefficients
Beta

76

Sig.

6.110

.000

International Journal of Business and Public Management (ISSN: 2223-6244) Vol. 2(2): 72-80

Default Rate
-.095
Bad Debt Cost
-.015
Cost per loan -.007
Asset
Dependent Variables: Return On Assets

BANK
KCB

.020
.018
.019

-.540
-.093
-.037

BANKS FINANCIAL ANALYSIS KSHS MILLION


YEAR
Total Lns & Non
TOTAL
Adv
performing
COST
Ins
2006
40,659.00
3,791.00
8,024.00
2005
32,849.00
3,602.00
6,935.00
2004
33,644.00
7,343.00
6,206.00
2003
24,949.00
7,899.00
6,299.00
2002
27,651.00
12,238.00
10,004.00
2001
30,485.00
10,280.00
10,064.00
2000
33,141.00
9,597.00
10,103.00

RATIOS
Default Rate
Bad Debt Cost
Cost per loan Asset
ROA

2006
8.53
8.0
0.2
2.7

2005
9.9
8.1
0.2
1.8

2004
19.7
14.1
0.2
1.0

2003
24.05
21.37
0.25
1.01

Default Rate
Bad Debt Cost
Cost per loan Asset
ROA

2006
26.99
11.0
0.3
0.5

TOTAL
ASSET

SPECFC
PROV

EBIT

642.00
565.00
878.00
1,331.00
4,684.00
4,530.00
4,360.00

87,326.00
74,338.00
66,349.00
57,750.00
57,193.00
62,289.00
65,889.00

1,024.00
1,380.00
958.00
12,463.00
12,352.00

2,355.00
1,343.00
640.00
581.00
(2,038.00)
(864.00)
(464.00)

2001
25.22
45.01
0.33
(1.39)

BANKS FINANCIAL ANALYSIS KSHS MILLION


YEAR Total
Non
TOTAL BDD
Lns & performing COST
COST
Adv
Ins
CONSOLIDATED 2006
1,642.00 607.00
483.00
53.00
2005
1,289.00 673.00
455.00
12.00
2004
1,115.00 874.00
421.00
43.00
2003
1,105.00 740.00
445.00
32.00
2002
1,025.00 564.00
452.00
37.00
2001
978.00
555.00
437.00
35.00
2000
942.00
546.00
462.00
60.00

EBIT

3,437.00
2,916.00
2,753.00
2,442.00
2,125.00
1,891.00
1,702.00

7.00
6.00
444.00
473.00

16.00
12.00
(71.00)
12.00
4.71
2.20
(7.00)

2005
34.3
2.6
0.4
0.4

2004
48.9
10.2
0.4
-2.6

2003
40.11
7.19
0.40
0.49

TOTAL
COST

BDD
COST

TOTAL
ASSET

SPECFC
PROV

EBIT

2,269.00

133.00

20,024.00

67.00

753.00

11,457.00
6,707.00
4,502.00
2,417.00
1,768.00
1,358.00

104.00
157.00

345.00
136.00
92.50
49.20
35.25
17.20

Total Lns &


Adv

EQUITY
BANK

2006

10,929.00

Non
performing
Ins
568.00

2005
2004
2003
2002
2001
2000

5,524.00
2,874.00
1,362.00
843.00
650.00
235.00

519.00
246.00
122.00
77.00
63.80
24.30

1,302.00
818.00
612.00
430.00
374.00
127.00

124.00
171.00
147.00
124.00
119.70
43.18

2005
8.6

2004
7.3

2003
8.22

2006
4.94

2000
22.46
43.16
0.30
(0.70)

SPECFC
PROV

YEAR

Default Rate

3,966.00

TOTAL
ASSET

BANK

RATIOS

.000
.397
.721

BDD
COST

2002
30.68
46.82
0.36
(3.56)

BANK

RATIOS

-4.729
-.0853
-.359

77

2002
35.49
8.19
0.44
0.22

2002
8.37

2001
36.20
8.01
0.45
0.12

2001
8.94

2000
36.69
12.99
0.49
(0.41)

2000
9.37

International Journal of Business and Public Management (ISSN: 2223-6244) Vol. 2(2): 72-80

Bad Debt Cost


Cost per loan Asset
ROA

5.9
0.2
3.8

9.5
0.2
3.0

20.9
0.3
2.0

24.02
0.45
2.05

TOTAL
COST

BDD
COST

TOTAL
ASSET

SPECFC
PROV

EBIT

3,708.00

408.00

81,014.00

639.00

2,634.00

72,842.00
67,113.00
64,111.00
58,271.00
52,414.00
49,516.00

627.00
295.00
264.00

2,452.00
1,833.00
2,789.00
2,582.00
2,362.00
2,175.00

2002
13.45
29.98
0.17
4.43

2001
13.62
35.02
0.17
4.51

2000
13.65
48.15
0,17
4.39

SPECFC
PROV

BANK

YEAR

Total Lns &


Adv

STANDARD
CHRTRD

2006

37,762.00

Non
performing
Ins
2,646.00

2005
2004
2003
2002
2001
2000

34,042.00
26,557.00
18,924.00
17,972.00
17,680.00
17,036.00

2,371.00
2,192.00
2,092.00
2,794.00
2,787.00
2,694.00

3,4223.00
3,689.00
3,395.00
3,022.00
2,973.00
2,833.00

394.00
547.00
810.00
906.00
1,041.00
1,364.00

2005
6.5
11.5
0.1
3.4

2004
7.6
14.8
0.1
2.7

2003
9.95
23.86
0.18
4.35

RATIOS

2006
6.55
11.0
0.1
3.3

Default Rate
Bad Debt Cost
Cost per loan Asset
ROA
BANK

YEAR

Total Lns &


Adv

COOP BANK

2006
2005
2004
2003
2002
2001
2000

28,037.00
29,089.00
27,009.00
20,165.00
16,123.00
13,250.00
11,632.00

RATIOS
Default Rate
Bad Debt Cost
Cost per loan Asset
ROA

2006
25.28
25.3
0.2
1.5

BANK

YEAR

Total Lns &


Adv

NBK

2006
2005
2004
2003
2002
2001
2000

26,491.00
24,213.00
22,302.00
20,320.00
18,564.00
18,350.00
18,385.00

RATIOS
Default Rate
Bad Debt Cost
Cost per loan Asset
ROA

2006
39.70
52.3
0.2
1.7

Non
performing
Ins
9,486.00
13,250.00
12,935.00
11,370.00
10,354.00
8,250.00
7,223.00

2005
31.3
23.1
0.2
0.8

Non
performing
Ins
17,438.00
17,146.00
5,124.00
5,883.00
8,100.00
8,230.00
7,527.00
2005
41.5
45.5
0.2
1.8

28.84
0.51
2.04

TOTAL
COST

BDD
COST

TOTAL
ASSET

5,624.00
4,553.00
3,822.00
3,500.00
2,733.00
2,120.00
1,977.00

1,424.00
1,054.00
886.00
720.00
670.00
630.00
607.00

57,683.00
51,835.00
48,461.00
36,720.00
29,855.00
27,200.00
25,572.00

2004
32.1
23.2
0.1
0.4

2003
36.06
20.57
0.17
0.28

32.01
0.58
1.99

15,075.00
12,969.00

1,638.00

2002
39.11
24.52
0.17
0.05

2001
38.37
29.72
0.16
(2.68)

34.00
0.54
1.27

EBIT
852.00
440.00
207.00
102.00
16.00
(730.00)
(1,438.00)
2000
38.31
30.70
0.17
(5.62)

TOTAL
COST

BDD
COST

TOTAL
ASSET

SPECFC
PROV

EBIT

4,439.00
3,655.00
3,533.00
3,434.00
3,380.00
3,355.00
3,377.00

2,321.00
1,663.00
1,677.00
1,563.00
1,537.00
1,502.00
1,569.00

36,123.00
32,584.00
30,594.00
25,919.00
24,520.00
24,255.00
23,967.00

1,425.00
3,434.00
2,160.00
2,275.00

624.00
599.00
382.00
404.00
21.00
(720.00)
(2,206.00)

2002
30.38
45.47
0.18
0.09

2001
30.96
44.77
0.18
(2.97)

2004
13.0
47.5
0.2
1.2

78

2003
22.45
45.52
0.17
1.56

6,380.00

2000
29.05
46.46
0.18
(9.20)

International Journal of Business and Public Management (ISSN: 2223-6244) Vol. 2(2): 72-80

BANK

YEAR

Total Lns &


Adv

BBK

2006
2005
2004
2003
2002
2001
2000

73,907.00
65,562.00
63,222.00
56,470.00
50,165.00
45,560.00
42,240.00

RATIOS
Default Rate
Bad Debt Cost
Cost per loan Asset
ROA

2006
7.76
10.2
0.1
3.8

2005
15.3
15.0
0.1
3.6

BANK

YEAR

Total Lns &


Adv

CFC

2006
2005
2004
2003
2002
2001
2000

15,053.00
11,662.00
10,969.00
7,831.00
7,266.00
5,346.00
5,261.00

RATIOS
Default Rate
Bad Debt Cost
Cost per loan Asset
ROA

2006
8.33
12.1
0.1
2.3

BANK

YEAR

Total Lns
& Adv

DTBK

2006
2005
2004
2003
2002
2001
2000

13,832.00
10,318.00
7,137.00
4,882.00
3,750.00
2,230.00
1,486.00

RATIOS
Default Rate
Bad Debt Cost
Cost per loan Asset
ROA

2006
0.22
3.5
0.12
2.2

Non
performing
Ins
6,214.00
11,877.00
5,237.00
6,192.00
6,123.00
4,918.00
2,981.00

2005
6.0
9.7
0.1
1.7

2005
0.1
6.7
0.13
1.8

BDD
COST

TOTAL
ASSET

8,648.00
8,844.00
8,384.00
9,152.00
8,944.00
7,027.00
8,289.00

881.00
1,330.00
1,913.00
1,613.00
1,513.00
1,037.00
1,641.00

118,021.00
104,522.00
106,195.00
96,655.00
85,914.00
73,647.00
70,377.00

3,844.00
2,652.00
1,016.00
1,032.00
692.00

2002
10.88
16.92
0.18
2.08

2001
9.73
14.76
0.15
4.01

2004
7.0
22.8
0.1
3.5

Non
performing
Ins
1,367.00
749.00
548.00
532.00
465.00
250.00
180.00

Non
perform
ing Ins
30.00
6.00
18.00
45.00
123.00
223.00
391.00

TOTAL
COST

2003
9.88
17.62
0.16
3.48

TOTAL
COST

BDD
COST

TOTAL
ASSET

1,419.00
942.00
2,677.00
1,894.00
1,725.00
1,532.00
1,493.00

172.00
91.00
75.00
115.00
113.00
98.00
64.00

40,369.00
33,095.00
29,816.00
16,430.00
14,235.00
12,354.00
7,972.00

2004
4.7
2.8
0.24
1.5

2003
6.36
6.07
0.2
1.82

TOTAL
COST

BDD
COST

TOTAL
ASSET

1,679.00
1,373.00
578.00
447.00
896.00
900.00
883.00

59.00
92.00
36.00
45.00
31.00
35.00
28.00

21,737.00
16,384.00
11,167.00
8,659.00
6,274.00
5,516.00
5,081.00

2004
0.3
6.2
0.1
1.5

2003
0.91
10.07
0.1
1.61

79

2002
6.01
6.55
0.24
1.72
SPECF
C
PROV
72.00
50.00
92.00
2002
3.18
3.46
0.2
1.20

SPECFC
PROV

SPECFC
PROV

260.00
235.00
150.00

2001
4.47
6.40
0.29
1.63

EBIT
4,492.00
3,729.00
3,694.00
3,367.00
1,783.00
2,955.00
2,068.00
2000
6.59
19.80
0.20
2.94

EBIT
940.00
552.00
433.00
299.00
245.00
201.00
194.00

2000
3.31
4.29
0.28
2.43

EBIT
488.00
295.00
164.00
139.00
75.00
41.00
164.00
2001
9.09
3.89
0.40
0.74

2000
20.83
3.17
0.59
3.23

International Journal of Business and Public Management (ISSN: 2223-6244) Vol. 2(2): 72-80

BANK

YEAR

Total Lns &


Adv

NIC

2006
2005
2004
2003
2002
2001
2000
1999

16,570.00
14,259.00
11,541.00
6,896.00
4,713.00
4,247.00
3,940.00
4,283.00

RATIOS
Default Rate
Bad Debt Cost
Cost per loan Asset
ROA

2006
3.63
10.2
0.08
1.8

Non
performing
Ins
624.00
175.00
214.00
134.00
346.00
431.00
419.00
354.00
2005
1.2
9.1
0.08
1.4

TOTAL
COST

BDD
COST

TOTAL
ASSET

1,306.00
1,116.00
782.00
585.00
491.00
477.00
489.00
557.00

133.00
101.00
20.00
57.00
88.00
70.00
113.00
228.00

26,052.00
20,700.00
16,643.00
10,990.00
9,329.00
8,396.00
7,442.00
7,212.00

2004
1.8
2.6
0.1
1.6

2003
1.91
9.74
0.1
2.45

80

2002
6.84
17.92
0.1
3.06

SPECFC
PROV

375.00
626.00
600.00
492.00
702.00
257.00
2001
9.21
14.68
0.11
4.21

EBIT
458.00
288.00
261.00
243.00
229.00
257.00
313.00
301.00
2000
9.61
23.11
0.12
4.21

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