DETERMINANTS OF NON-PERFORMING LOANS OF DEPOSIT BANKS IN TURKEY

Year 2016, Volume: 5 Issue: 4, 341 - 350, 30.12.2016

Ozcan Isik , Suleyman Bolat

https://doi.org/10.17261/Pressacademia.2017.356

Abstract

This study empirically analyzes the factors that
determine the non-performing loans (so-called bad loans) of 20 deposit banks in
Turkey for 2006-2012 period using panel data analysis method. The analysis
results reveal that solvency, profitability, credit quality, diversification,
economic growth and the recent financial crisis are essential indicators of
non-performing loans rate in Turkish banking sector. More specifically, greater
profitability and revenue diversification significantly lowers non-performing
loans rate, whereas greater capital and loan loss provisions significantly
increase non-performing loans rate. In terms of macroeconomic variables, only
economic growth has a negative effect on the non-performing loans (NPLs) ratio.
Moreover, our results also uncover that deposit banks’ NPLs ratio increases
during the latest global financial turmoil period. 

Keywords

Deposit banks, non-performing loans, panel data analysis, credit risk, Turkey

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