Determinants of commercial bank’s non-performing loans in Bangladesh: An empirical evidence

Figures & data

Table 1. Name of selected scheduled commercial banks in Bangladesh

Name of Selected Commercial Banks	Name of Selected Commercial Banks
AB Bank	Mutual Trust Bank Limited
Bank Asia	National Bank Limited
Islami Bank Bangladesh Limited	Prime Bank Limited
Jamuna Bank	Eastern Bank Limited
The City Bank Limited	International Finance Investment and Commerce Bank Limited (IFIC)
Southeast Bank Limited	Janata Bank Limited
Premier Bank	Uttara Bank Limited
Social Islami Bank Limited	Standard Bank Limited
Dutch Bangla Bank Limited	NCC Bank Limited
ONE Bank Limited	Al-Arafah Islami Bank Limited
United Commercial Bank	Trust Bank
Exim Bank	Pubali Bank Limited
Brac BanK Limited	Shahjalal Islami Bank Limited
Dhaka Bank Limited	Agrani Bank
Mercantile Bank Limited	Rupali Bank

Author’s Survey.

Table 2. Selected variables

Variables		Elaboration	Signs of Expectation
Dependent Variable	NPLs	Non-performing Loans Ratio
Independent Variable
Bank Size	LTA	Log of Total Assets	-
Capital Adequacy	CA	Total Capital Ratio (Capital Adequacy Ratio)	+
	ECTA	Equity Capital to Total Assets	+
Provisioning policy	LLPTL	Loan Loss Provision to Total Loan	+
	LLPTE	Loan Loss Provision to Total Equity	+
Credit Advancement Policy	GLTA	Loan Ratio (Gross Loan to Total Assets)	+
	NLTDB	Net Loan to Total Deposits and Borrowings	+
Profitability	ROA	Return on Assets	-
	ROE	Return on Equity	-
Macroeconomic Variables	GDP	Yearly Growth of GDP (%)	-
	Inflation	Annual average inflation rate (%)	+

Author’s Contribution.

Table 3. Descriptive analysis

Variable	Observation	Mean	Std. Dev.	Min	Max
NPLs	300	0.0595	0.0423	0.0095	0.2559
LTA	300	25.9695	0.5948	22.8706	27.5256
ECTA	300	0.1034	0.1436	0.0093	1.0000
CA	300	0.1223	0.0771	0.0370	1.2128
LLPTL	300	0.0281	0.1442	0.0006	1.9520
LLPTE	300	0.1320	0.3083	0.0010	3.8223
GLTA	300	0.6703	0.4598	0.0058	7.0331
NLTDB	300	0.8058	0.1736	0.0072	1.1213
ROA	300	0.0109	0.0157	−0.04917	0.14658
ROE	300	0.1083	0.2269	−2.5994	1.2183
GDP	300	0.0670	0.0050	0.0600	0.0758
Inflation	300	0.0704	0.0176	0.0561	0.1105

Author’s Computation.

Table 4. Correlation analysis

	NPLs	Lag NPLs	LTA	ECTA	CA	LLPTL	LLPTE	GLTA	NLTDB	ROA	ROE	GDP	Inflation
NPLs	1
Lag NPLs	0.7522***	1
LTA	0.3585***	0.3880***	1
ECTA	0.0038	−0.0106	−0.3089***	1
CA	−0.115*	−0.0813	−0.089	0.0029	1
LLPTL	0.0711	0.0333	−0.0351	0.1886***	−0.0065	1
LLPTE	0.3932***	0.1399**	0.1595**	−0.0754	−0.0527	0.0970	1
GLTA	−0.1192*	−0.1112	−0.3855***	0.2765***	−0.0027	−0.1288*	−0.0320	1
NLTDB	0.4046***	0.4010***	−0.0232	0.3691***	0.0402	0.4030***	0.0062	0.2405***	1
ROA	−0.1785***	−0.1081	−0.5428***	0.5103***	0.0324	0.1808***	−0.2889***	0.4741***	−0.0935	1
ROE	−0.3881***	−0.1717**	−0.1768**	−0.0085	0.0533	−0.0621	−0.7391***	0.0293	0.0782	0.4618***	1
GDP	0.1197*	0.1446**	0.3638***	0.0235	0.0089	−0.0638	0.0334	0.0004	0.1300	−0.1062	−0.0008	1
Inflation	−0.2622***	−0.4236***	−0.3628***	−0.0465	−0.0619	−0.0142	−0.0944	−0.0119	0.0447	0.1055	0.0933	−0.4916	1

Authors’Calculation.

Table 5. Test of multicollinearity

Test of Multicollinearity
Variable	VIF	1/VIF
ROA	3.79	0.2636
ROE	3.37	0.2966
ECTA	3.16	0.3169
LLPTE	2.42	0.4132
NLTDB	2.17	0.4618
LTA	2.14	0.4682
Lag NPLs	1.87	0.5360
GLTA	1.86	0.5362
Inflation	1.69	0.5906
GDP	1.52	0.6573
LLPTL	1.36	0.7379
CA	1.04	0.9582
Mean VIF	2.12

Authors’ Computation.

Table 6. Hausman test result

Test: Ho: difference in coefficients not systematic
chi2(13) = 177.87
Prob>chi2 = 0.0000

Authors’ Calculation.

Table 7. Empirical models

	Random Effect Model	Fixed Effect Model	GMM One System
NPLs	Coefficient (Std. Err.)	Coefficient (Std. Err.)	Coefficient (Std. Err.)
Lag NPLs	0.5986 (0.0520) ***	0.1927 (0.0588) ***	0.4631 (0.0827) ***
LTA	0.0058 (0.0042)	−0.0117 (0.0088)	0.0158 (0.0121)
ECTA	−0.0191 (0.0210)	−0.0317 (0.0184) *	0.0194 (0.0265)
CA	−0.0155 (0.0225)	−0.0173 (0.0200)	−0.0163 (0.0284)
LLPTL	−0.0125 (0.0137)	0.0106 (0.0132)	0.0089 (0.0160)
LLPTE	0.0308 (0.0086) ***	0.0212 (0.0084) **	0.0323 (0.0127) *
GLTA	0.0014 (0.0050)	−0.0028 (0.0048)	0.0022 (0.0065)
NLTDB	0.0423 (0.0144) ***	0.0054 (0.0167)	0.0033 (0.0199)
ROA	0.1781 (0.2108)	−0.0263 (0.2217)	0.1568 (0.3050)
ROE	−0.0233 (0.0137) *	−0.0043 (0.0135)	−0.0161 (0.0200)
GDP	0.5423 (0.4158)	0.3991 (0.4049)	−2.0053 (1.1841) *
Inflation	0.2328 (0.1253) *	0.4504 (0.1368) ***	1.4950 (0.7905) *
_cons	−0.1788 (0.1191) ***	0.3659 (0.2275) ***	−0.2729 (0.2873) ***
Wald chi2(14) =	427 ***		103.16 ***
F Value		F(14,166) = 7.61***
Maximum Lag
R-sq: within	0.2895	0.3908
between	0.9640	0.7112
overall	0.6865	0.4270

Authors’ Computation.