Academy of Accounting and Financial Studies Journal (Print ISSN: 1096-3685; Online ISSN: 1528-2635)


Assessment of Credit risk Management of Saudi Banks

Author(s): Ishtiaq Ahmad Bajwa, Ali Murad Syed, Adel Alaraifi, Waleed Rafi

Banks are exposed to different types of risks, which can affect their financial performance and can even lead to failure of banks. The collapse of any bank is possible to happen due to the increase in non-performing loans which is a part of credit risk. Credit risk is one of the most significant risks that banks face, in view of granting credit is the main source of income for commercial banks. The research paper pursues to assess the credit risk of Saudi banks by doing financial ratio analysis from 2013-2017. Financial ratio analysis was conducted based on secondary data of 12 Saudi banks licenced by SAMA to find out the NPL/ total loans ratio, NPL/ total assets ratio, and Basel III Capital Standards ratios. Analysis showed that Saudi banks are in a good stage of Basel III implementation and have achieved more than the minimum requirements related to Common Equity Ratio, Tier I Capital Ratio, and Capital Adequacy Ratio regarding Basel III requirements. Saudi banks are also performing strong return of equity (ROE) measure and their financial performance is stable over the sample period of 5 years.