The Impact of Delinquent Loans on Financial Performance of Banks in Ghana
Bismark Addai
School of Management and Economics, University of Electronic Science and Technology of China (UESTC), No. 4 Section 2, North Jianshe Road, Chengdu 610054, China
Chengyi Pu *
School of Economics, Southwest University for Nationalities, No.16, Section 4, 1st Ring Road South, Chengdu City, Sichuan Province 610041, China
*Author to whom correspondence should be addressed.
Abstract
Loan portfolio is the largest asset and the biggest source of income for banks; consequently, most banks advance huge portions of financial resources as loans to clients. Despite the stringent evaluation and monitoring strategies put in place by banks to ensure repayment of loans by borrowers, a considerable proportion of loans become delinquent. Empirical evidence on the incidence of non-payment of loans on financial performance of Banks in Ghana is very limited. Consequently, this study investigates into the impact of delinquent loans on financial performance (interest income and net profit) of banks in Ghana. Glaring in this study is a statistically significant impact of delinquent loans on interest income and net profit. At α = 0.05, delinquent loans significantly affect both interest income [F (1, 48) = 119.28, P < 0.05, partial
Keywords: Delinquent loans, interest income, net profit, financial performance, banks, Ghana