The Impact of Credit Risk on the Profitability of Banks Listed on the Palestine Exchange

Abstract

This study seeks to analyze the impact between credit risk and the profitability of five banks on the Palestine Exchange. Profitability was measured by return on equity and return on assets while credit risk was measured by net charge-offs to total loans and advances, non-performing loans to total loans and advances and pre-provision profit to total loans and advances. Other variables like bank size, leverage and net income growth were included to account for their effects. The study found a weak but positive relationship between credit risk as measured by non-performing loans to total loans and advances and profitability as measured by return on assets. The study also found that bank size was positively related to profitability. Keywords: Profitability, Credit Risk, Palestine Listed Bank