Analysis of public sector banks on the basis of equity research, determinants of banks profitability and nonperforming assets

Abstract

Nonperforming Assets (NPA) are the major problem for today’s Banking Industry, and it is being beheld that they are growing with time. So, through this study, the variables that lead to NPA are found. For the study, both bank-specific and macroeconomic variables are taken, to see whether the bank-specific too formulate an effect on NPA or they came out to be insignificant. The variables that lead to NPA are Management Efficiency, Asset Management, GDP, REER, NEER, Inflation, Unemployment and Real Interest Rate. The research for banks’ profitability to see if the same variables lead to NPA, moreover, influence profitability, but the result came out to be that there is only Asset Management, which impacts both. In the end, equity exploration on the four significant variables is conducted, to determine which bank has underperformed or overperformed on which variable.