Authors: Athraa Yousif, Safar Haji, Assistant Professor Mr. Manoj Sangisetti
Abstract: This study examines the impact of credit risk management on the financial performance of the Bank of Baghdad over the period 2019–2024. The findings reveal a strong positive correlation between effective credit risk strategies and key performance indicators, including Return on Assets (ROA) and Return on Equity (ROE), which increased significantly—ROA from 0.65% to 9.75%, and ROE from 2.67% to 42.18%. These improvements occurred alongside sustained earnings growth and enhanced asset utilization, even as total assets nearly tripled. The bank's consistently high Capital Adequacy Ratio (CAR), remaining well above Basel III requirements, reflects a prudent capital strategy that has helped absorb risks associated with aggressive lending and asset expansion. However, persistently high leverage, evidenced by a peak debt-to-equity (D/E) ratio of 480.19%, raises concerns about financial vulnerability during adverse conditions. Credit risk indicators such as EBIT margin and interest coverage ratio also improved markedly, enhancing the bank’s debt-servicing capacity and reducing default risk. Conversely, the deterioration in the efficiency ratio, rising from 62.51% to 88.74%, signals growing operational costs and potential strain on future profitability. Overall, while the Bank of Baghdad demonstrates robust financial performance driven by strategic credit risk management, ongoing monitoring of leverage, cost efficiency, and capital sustainability remains essential for maintaining long-term financial resilience.
