Impact of Credit Risk Management on Financial Performance of Leading Commercial Banks in Pakistan

Abstract

This study attempted basically to measure the impact of credit risk management on the performance of top ten selected Pakistani Private commercial banks for the period 2011- 2015. It is evaluatory, sketch sources of information from secondary data. Credit risk management is one of the most important domains of for commercial banks to increase their financial performance. In prevailing rapid growth and intense competition in banking sector how does the sector manage to maintain their returns and profitability? Is the sector going for sound credit risk management or not? If yes, then how that is beneficial to increase the profitability? Thus identifying the determinants to identify the financial performance and impact of credit risk management is the idea around which the research rotates.In this paper an attempt was made to analyze the financial performance of ten selected Pakistani Private commercial banks using simple regression in order to estimate the impact of independent variable represented by; the bank size, asset management, and non-performing loan on dependent variable financial performance represented by; return on assets and interest income. This study can be a source of help to bank managers to improve their financial performance and formulate policies that will promote effective financial system. The study also recommends measures that could be adopted by banks to ensure soundness in their operations.