THE IMPACT OF BAD-DEBTS ON THE PROFITABILITY OF BANKS (HBL, ABL & UBL)

Abstract

Purpose of Study: The main puipose of conducting this study is to determine the impact of bad debts on the profitability of banks specifically ABL, HBL & UBL. Banks play an integral role in running the economic affairs ofthe country. In the past few years the banking sector has shown a significant growth pattern. The recovery of these payments is the major earnings of the bank however; the other side of the picture is that they also had to bear some challenges like, default in recovery ofinstalment payments. Methodology: the research is quantitative and descriptive in nature. Regression testing and correlation testing is used in order to determine the relationship between independent and dependent variables. The independent variable includes (bad debts - Independent variable) and profitability as dependent variable. The sample size includes financial records for last 10 years of ABL, HBL & UBL banks. Findings: The findings from the study suggest that, there is an impact of bad debts on profitability the banks but the impact is low because, these banks have maintained the level of debts up to a certain extent and is increasing avenues of profitability. This means that, specifically in these three banks the impact of bad debts on profitability is there but its impact is low. Conclusion: In conclusion, the research highlights that, there exists some relationship between bad debt and profitability and it can also hurt the bank’s profitability if measures are not taken. The study provides some evident recommendations through which these banks can reduce the bad debts