Abstract:
This study intended to find out the effect of credit risk management on profitability of
commercial banks in Uganda, particularly centenary bank Pallisa branch. Credit risk
management was viewed as three dimensional construct consisting of non-performing loans
(NPL), capital adequacy ratios (CAR) and loan loss provisions (LLP). Profitability on the other
hand was viewed in terms of ROA, ROE, and Net Profit Margin. The study used cross sectional
research design and quantitative approach. Data were collected from 50 as a target population
comprising of loan officers, administrators, branch supervisors and the accountants. Data was
collected using a closed end questionnaire and statistical package of social science was used for
analyzing data from which frequency tables, descriptive statistics, reliability, validity, correlation
and regression results were obtained. The findings of the study revealed that there is a positive
and significant effect between Non-performing loan ratio and profitability; capital adequacy ratio
profitability; and loan loss provision ratio and profitability. Therefore, the study, recommends
that in order for the commercial banks to improve on profitability the owner’s particular
centenary bank Pallisa branch should depend on appropriate reducing non-performing loan ratio,
capital adequacy ratio and loan loss provision ratio.
