He Effect Of Credit Risk On The Profitability Of Commercial Banks In Ethiopia The Case Of Dashen Bank S.C

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.