The impact of credit risk management on financial performance of commercial banks: A case study of AB bank Zambia

Nambeye, Cynthia and Manchishi, Brian (2025) The impact of credit risk management on financial performance of commercial banks: A case study of AB bank Zambia. World Journal of Advanced Research and Reviews, 26 (1). pp. 1464-1474. ISSN 2581-9615

This study investigated the effects of credit risk management on the financial performance of AB Bank Zambia for a period 2013-2023. Primary data was collected through questionnaires and Secondary data through the analysis of AB Bank’s annual financial reports. The data was analyzed using correlation, and tables, bar charts which were generated in the Statistical Package for Scientists (SPSS) version 26 The findings revealed that there was a strong negative relationship between non-performing loans (NPL) ratio and profitability. Higher levels of NPL reduces profits of banks. The results showed a positive relationship between capital adequacy ratio (CAR) and return on assets, indicating that a higher CAR enhances financial performance by providing a buffer against potential losses. Furthermore, the positive correlation was observed between loan deposit ratio and return indicating that an optimal loan to deposit balances liquidity and profitability. A strong capital base allows banks to absorb potential losses, and its ability to generate profits. Poor credit risk management for the bank can lead to significant losses while effective management can enhance profitability and optimize asset utilization Recommendations include enhancing credit risk management practices, maintaining a robust capital base, tailored financial literacy initiatives, and continuously monitoring of the liquidity levels. These recommendations aim to improve the credit risk management of AB Bank Zambia.