TY - JOUR
T1 - Impact of COVID-19 on Financial Performance and Profitability of Banking Sector in Special Reference to Private Commercial Banks
T2 - Empirical Evidence from Bangladesh
AU - Gazi, Md Abu Issa
AU - Nahiduzzaman, Md
AU - Harymawan, Iman
AU - Al Masud, Abdullah
AU - Dhar, Bablu Kumar
N1 - Publisher Copyright:
© 2022 by the authors. Licensee MDPI, Basel, Switzerland.
PY - 2022/5/1
Y1 - 2022/5/1
N2 - The current crisis caused by the COVID-19 pandemic has hit the global economy hard, causing significant damage to every aspect of the global banking system, and Bangladesh is no exception. For that reason, its performance and profitability have been affected. In this study, we investigate the impact of COVID-19 on the financial performance and profitability of the listed private commercial banks in Bangladesh. We initially compute each bank’s financial performance index (FPI) to determine the position according to their financial performance individually before and the current period of COVID-19 by the standardized CAMELS rating system. After assessing the position, the fixed-effect regression model is used to explore the impact of the bank’s specific variables and macroeconomic variables along with the banks’ variables on the banks’ profitability. The banks that performed better during the pre-pandemic period of COVID-19 also performed better during the pandemic period of COVID-19. The performance of AIBL, EBL, and BBL was almost autonomously higher during both periods. In the case of bank profitability, our paper dis-covered that during the pandemic period of COVID-19, high non-performing loan rates, holding more liquid assets, a high amount of hedging capital, and inappropriate bank size lessened the banks’ profitability. In contrast, a low leverage position and inflation rate enhanced the bank’s profitability during this period. The outcome of this study will help bank authorities detect the loopholes and take preventive measures that can improve their profitability during a crisis period like COVID-19. The investors and depositors who invest money in banks can precisely decide their portfolios.
AB - The current crisis caused by the COVID-19 pandemic has hit the global economy hard, causing significant damage to every aspect of the global banking system, and Bangladesh is no exception. For that reason, its performance and profitability have been affected. In this study, we investigate the impact of COVID-19 on the financial performance and profitability of the listed private commercial banks in Bangladesh. We initially compute each bank’s financial performance index (FPI) to determine the position according to their financial performance individually before and the current period of COVID-19 by the standardized CAMELS rating system. After assessing the position, the fixed-effect regression model is used to explore the impact of the bank’s specific variables and macroeconomic variables along with the banks’ variables on the banks’ profitability. The banks that performed better during the pre-pandemic period of COVID-19 also performed better during the pandemic period of COVID-19. The performance of AIBL, EBL, and BBL was almost autonomously higher during both periods. In the case of bank profitability, our paper dis-covered that during the pandemic period of COVID-19, high non-performing loan rates, holding more liquid assets, a high amount of hedging capital, and inappropriate bank size lessened the banks’ profitability. In contrast, a low leverage position and inflation rate enhanced the bank’s profitability during this period. The outcome of this study will help bank authorities detect the loopholes and take preventive measures that can improve their profitability during a crisis period like COVID-19. The investors and depositors who invest money in banks can precisely decide their portfolios.
KW - CAMELS
KW - COVID-19
KW - financial performance index
KW - macroeconomic variables
KW - panel data
KW - profitability
KW - regression
UR - http://www.scopus.com/inward/record.url?scp=85130895467&partnerID=8YFLogxK
U2 - 10.3390/su14106260
DO - 10.3390/su14106260
M3 - Article
AN - SCOPUS:85130895467
SN - 2071-1050
VL - 14
JO - Sustainability (Switzerland)
JF - Sustainability (Switzerland)
IS - 10
M1 - 6260
ER -