Wits Business School (ETDs)

Permanent URI for this communityhttps://hdl.handle.net/10539/37941

Browse

Filters

2023 - 20242

Settings

Has files: YesSubject: search.filters.subject.Bank performance

Search Results

Now showing 1 - 2 of 2
  • Thumbnail Image
    Item
    The impact of credit risk on the financial performance of commercial banks in Lesotho
    (University of the Witwatersrand, Johannesburg, 2024) Ramphoko, Lepapa Gerard; Mudavanhu, Blessing
    Commercial banks play a crucial role in economic development by allocating financial resources from surplus to deficit units, thereby creating value through credit extension. Therefore, the financial performance of commercial banks across the globe is of utmost importance to all the stakeholders. This study therefore determines the impact of credit risk on the financial performance of commercial banks in Lesotho. The measurement of the study variables includes the use of Return on Equity (ROE) for bank’s financial performance and Capital to Risk-Weighted Assets Ratio (CRWAR), Asset Quality Ratio (AQR), Loan Loss Provision Ratio (LLPR), and Loans and Advances Ratio (LAR) for credit risk assessment. The study adopts a quantitative research design to analyze panel data collected from the audited financial statements of four commercial banks in Lesotho spanning for 2012-2021 using the panel least squares regression model. The results from the fixed effects estimation technique revealed an inverse relationship between the two credit risk measures: CRWAR and LAR with bank performance (ROE), emphasizing the importance of prudent credit risk management practices. Conversely, LLPR had a positive relationship with bank performance (ROE), highlighting the role of adequate loan loss provisions in enhancing bank profitability. Based on these findings, recommendations are proposed for the effective management of credit risk in commercial banks in Lesotho. First, emphasis is placed on improving LLPR to enhance ROE, emphasizing the need for prudent credit risk assessment, portfolio diversification, and effective collateral policies. Lastly, attention is drawn to liquidity management, considering the observed negative impact of LAR on ROE. Banks are urged to prioritize liquidity risk management, maintaining adequate liquidity buffers, and implementing strategies to address liquidity shortfalls.
  • Thumbnail Image
    Item
    Regulation and its impact on bank performance: The case of Basel Accords
    (University of the Witwatersrand, Johannesburg, 2023-11) Masole, One Maitumelo; Mudavanhu, Blessing
    The purpose of this thesis is to investigate the effect of the Basel Accords regulatory capital requirements on bank performance of the African banking sectors. The sample for the study included countries that had at a minimum adopted Basel II regulatory capital requirements and had data available for the research period. The countries selected were Botswana, Kenya, Malawi, Namibia, Tanzania, Uganda, Zambia and Zimbabwe. The empirical analysis adopted the multiple regression estimations to ascertain the effects of regulatory capital on bank performance. In addressing the research objectives, the study used the three proxies of regulatory capital and these were capital adequacy ratio (CAR), core capital ratio (CC) and total capital to total assets ratio (TCTA). The banking sector performance was measured by the financial soundness indicators of profitability (Return on Assets and Return on Equity) and financial intermediation (Loans to Deposit ratio). The empirical results showed that the regulatory capital requirements of CAR and TCTA had a positive effect on Return on Assets and Return on Equity, whereas the CC negatively affected the profitability ratios. The financial intermediation was negatively affected by both CAR and CC, and the positively affected by the TCTA. The mixed results of the impact of the Basel Accords capital requirements on the performance of banks was an indication that the regulatory standards can have unintended consequences on bank performance. Thus, it can be deduced that, the adoption of the Basel Accords in Africa should be informed by an in-depth analysis of the possible negative effects which should countered with appropriate regulatory policy decisions.