Impact of Credit Risk on the Performance of Russian Commercial Banks

Аbu-Аlrop J.H.A., Kokh I.A. Impact of Credit Risk on the Performance of Russian Commercial Banks. Journal of Applied Economic Research, 2020, Vol. 19, No. 1, 5–18. DOI: 10.15826/ vestnik.2020.19.1.001.

14 Pages Posted: 23 Oct 2020

Date Written: September 2, 2020

Abstract

This study examined the effect of credit risk on the performance of 85 Russian commercial banks during the period (2008–2017). This study used multiple regression to measure the effect of credit risk on the performance of Russian banks. The study found that the Performance indicators were affected by credit risk in five years out of ten. Credit risk contributed to the formation of performance indicators by 51 % in the case of return on assets and 50 % in return on equity. Also, the loan loss provisions to total loans ratio had a negative effect for 4 years because of the decline in credit quality in those years; the effect of total Loan to total assets was only positive in one year. Also, the study found that the effect of the ratio of loan loss provisions to total loans was negative and greater than the positive impact of the ratio of total loans to total assets because the impact of credit quality is greater and more important than the impact of its volume. The study concluded that the effect of credit risk on the performance of Russian banks is not a fixed effect but a changing one from one year to another, but in cases where credit leaves an impact on performance indicators this effect is often negative and significant. The study also concluded that the quality of credit has a significant and negative impact on performance indicators, but the volume of the credit has a limited impact.

Keywords: Credit Risk; Loan Losses Reserves; Russian Commercial Banks; Return on Assets; Return on Equity; Multiple Regression Analysis; Provisions Loan Losses; Total Loans

JEL Classification: G210

Suggested Citation

Abu-Alrop, Jalal Hafeth, Impact of Credit Risk on the Performance of Russian Commercial Banks (September 2, 2020). Аbu-Аlrop J.H.A., Kokh I.A. Impact of Credit Risk on the Performance of Russian Commercial Banks. Journal of Applied Economic Research, 2020, Vol. 19, No. 1, 5–18. DOI: 10.15826/ vestnik.2020.19.1.001., Available at SSRN: https://ssrn.com/abstract=3685358

Jalal Hafeth Abu-Alrop (Contact Author)

Kazan Federal University ( email )

Streey The Kremlin, 18
Kazan, Tatarstan 420008
Russia
420010 (Fax)

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