The assessment of the profitability level of loan granting in case of possible delays of invested funds returns
Journal Title: Visnyk Ternopilskoho natsionalnoho ekonomichnoho universytetu - Year 2016, Vol 1, Issue
Abstract
It is established that loaning is the largest source of income in the banking business. However, this process is accompanied by risks that directly affect the financial stability and reliability of the banking institution. The importance of mathematical tools for assess- ing the effectiveness of bank lending scenarios and forecasting credit portfolio management in overdue loans in order to increase the profitability of lending has been proved. The aim and the objectives of this research are to develop a feasibility study and assessment mechanism toolkit profitability of the loan portfolio for possible delays invested funds returns to meet the interests of the bank associated with minimizing the risk of loan defaults and improve the quality of the loan portfolio have been formulated. The dynamics of bank lendings in Ukraine and their dynamics of arrears during the period from 01.01.08 to 01.12.15 have been analyzed. It was found that the moderate growth of loans granted by Ukrainian banks leads to rapid growth of share of the overdue loans, which could lead to another crisis in the banking system and the bankruptcy of a significant number of banks, since they get the main income from active operations and banking services. The lending process, which allows only initial investment has been modeled. It considers the fact of the possible delay in the invested funds returns and borrowers’ inability to meet their financial obligations. The connection between the bank’s profitability and timely return of invested funds has been set. The minimum internal rate of return at the greatest possible delay the return of invested funds, the maximum value of internal rate of return with no delay and income measure of risk of internal rate of return have been analytically calculated. Using this model can estimate the rate of change of internal rate of return from a delay in the time dependence of the expectation internal rate of return on the initial investment and the dependence of the density distribution function internal rate of return has been proved.
Authors and Affiliations
Oleg Ivashchuk, Nataliia Dziubanovska, Galina Seniv
Keywords
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The assessment of the profitability level of loan granting in case of possible delays of invested funds returns
It is established that loaning is the largest source of income in the banking business. However, this process is accompanied by risks that directly affect the financial stability and reliability of the banking institutio...