Abstract:
The study investigates the impact of financial risk on bank performance of Habib Bank
Limited using the annual financial time series data from 2005 to 2021. The dependent variable is
the bank performance which is measured through the return on equity. The independent variables
are the financial risks, which includes the credit risk, liquidity risk, and market risk. The findings
suggest that the credit risk and liquidity risk has negative significant effect on the return on equity,
which means that the increase in credit risk and liquidity risk would result in declining the
profitability ofHabib Bank Limited. Moreover, the operational risk has positive significant effect
on the return on equity. The study concludes that Habib Bank Limited need to control the credit
risk and liquidity risk to perform well in the market. It is recommended that the Habib Bank
Limited must adopt strict policies and must do risk analysis of each borrower before issuing loan.
To control the liquidity risk Habib Bank Limited must offer attractive financial products to
motivate the depositors to deposit more in account rather than handling cash.
