The impact of non-performing loans on the profitability of Jordanian commercial banks

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Published: Dec 31, 2025

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Keywords:
Non-Performing Loans, Return on Assets, Profitability, Jordanian commercial banks, COVID-19.,
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DOI:10.25130/tjaes.21.72.2.2
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DOI: 10.25130/tjaes.21.72.2.2
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DOI:10.25130/tjaes.21.72.2.2

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Saja Fathi Mohammed Younis
College of Administration and Economics/University of Mosul
saja.fathi@uomosul.edu.iq

DOI:https://doi.org/10.25130/tjaes.21.72.2.2

Abstract

The current study aims to investigate the relationship between non-performing loans (NPLs) and the profitability of Jordanian commercial banks. Data from 13 commercial banks was analyzed for the period 2010-2023. Panel data, which combines time series and cross-sectional data, was employed, we used descriptive statistics and three regression models, namely; the Pooled OLS regression model, Fixed Effects (FE), Random Effects (RE), to test the hypotheses. The results found that non-performing loans have a negative and significant impact on the profitability of Jordanian commercial banks, measured by return on assets (ROA) and return on equity (ROE). In addition, the study revealed that bank size and capital adequacy have a positive and significant impact on the profitability of commercial banks, while the results revealed that the ratio of loans to total deposits has a negative and significant impact on the profitability of Jordanian commercial banks. The study recommends that bank managements prioritize the management of non-performing loans and handle them appropriately, especially under exceptional circumstances such as the COVID-19 pandemic. This will help formulate strategies to mitigate risks and ensure the stability of the Jordanian banking sector.

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How to Cite
Saja Fathi Mohammed Younis. (2025). The impact of non-performing loans on the profitability of Jordanian commercial banks. Tikrit Journal of Administrative and Economic Sciences, 21(72 part 2), 12–32. https://doi.org/10.25130/tjaes.21.72.2.2
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Vol. 21 No. 72 part 2 (2025): vol.21, no 72 part 2 year 2025
Section
Articles

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