The impact of credit risk on profitability of commercial banks in the Yemeni economy during the period of political instability and war (2011-2020

Abstract

The objective of the study was to analyze the impact of credit risk on the profitability of five Yemeni commercial banks. Profitability was measured using two dependent variables: The return on assets (ROA) and return on equity (ROE). The variables utilized to represent credit risk are: The ratios of non-performing loans (NPL) and capital adequacy (CAR). The methodology employed for the statistical analysis is Banel's models through Eviews program technology for commercial bank data during the period (2011 – 2020). The results indicated that there is a negative and statistically significant relationship between the non-performing loan ratio and both return on assets and return on equity. In regard to the capital adequacy ratio، the findings revealed a positive and statistically significant association with return on assets، while it did not show a relationship with return on equity.