The Impact of Credit Risk on Profitability of Selected Private Commercial Banks in Ethiopia

Abstract

This Research aimed to analyses the impact of credit risk on profitability of six selected private commercial Banks in Ethiopia. The study specifically sought to examine the relationship between credit risk and the profitability of the firm as measured by ROA. The Researcher used an explanatory research design. Secondary data was gathered from the audited annual reports of the six selected private Commercial Banks and National Bank of Ethiopia for 20(2000-2019) Years. The Data were analyzed using a descriptive statics and panel data regression model and the result showed that credit risk measures; Non-performing loan, loan loss provisions ratio, and capital adequacy ratio have a significant impact on the profitability of private commercial Banks in Ethiopia. The study suggested a need for enhancing credit risk management to maintain the prevailing profitability of private commercial banks in Ethiopia.