Abstract:
The purpose of the study is to identify the effect of credit risk on the profitability of Commercial
Banks in Ethiopia the case of Dashen bank S.Co. The Banks was selected for the reason that the
banks had immense banking exposure particularly credit service. The required secondary data
obtained from annual financial statements of Dashen bank S.Co. The study used explanatory
research design. Purposive sampling was used to select Dashen banks. Method of data analysis
used in the study included frequency, percentages, correlation and multiple regressions.The
study found that Dashen bank has lower return on asset. The study found that Dashen bank
averagely returns for their owners during the period under the study. The study found that CAR
is above the minimum requirement of CAR for Ethiopia bank showing that the bank has ability to
bear loss result from loan default and other operational shock. The study also indicated that the
bank is getting into a weak credit risk control. The study also indicated that bank borrows
money to grant loans to its customers. Such a position leads to higher interest on loans
compared to loans generated from deposit funds. The study recommends that banks should keep
adequate capital levels and keep quality assets on their books since the outcome of the study
suggest significant relationship between credit risk indicators and profitability.
