Emerging from the Storm: Forecasting Bank Loan Quality in the Aftermath of COVID-19

Athina Tori, Ardit Gjeci and Andromahi Kufo

European Journal of Interdisciplinary Studies, 2024, issue 01

Abstract: As part of the credit risk management process of financial institutions, the non-performing loans (NPLs) ratio remains one of the essential components that distinguishes the well-managed assets of a bank. In this paper, we aim to empirically forecast the level of non-performing loans (NPL) including afflicted periods like the COVID-19 ­pandemic using a seasonal ARIMA model. Our analysis is based on the NPLs level observed in the Albanian banking system between December 2015 and December 2022. The results indicate that the seasonal ARIMA (0,1,1)x(2,2,2)12 is the appropriate model that can be applied to predict the monthly level of NPLs. The results also reveal that the expected average monthly ratio of NPLs remains stable, with a slight decrease until the end of 2023. Efforts to be proactive rather than reacting post-factum involve using mechanisms and forecasting models to define non-performing loan ratios and better manage them. This paper considers significant implications in credit risk management in terms of developing actions to manage the magnitude of non-performing loans throughout the COVID-19 pandemic.­

Keywords: COVID-19; forecasting; SARIMA; non-performing loans (search for similar items in EconPapers)
JEL-codes: C23 C53 E37 G21 (search for similar items in EconPapers)
Date: 2024
References: View complete reference list from CitEc
Citations:

Downloads: (external link)
https://ejist.ro/files/pdf/537.pdf (application/pdf)
https://ejist.ro/abstract/537/Emerging-from-the-St ... n-the-Aftermath.html (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:jis:ejistu:y:2024:i:01:id:537

Access Statistics for this article

More articles in European Journal of Interdisciplinary Studies from Bucharest Economic Academy Contact information at EDIRC.
Bibliographic data for series maintained by Alina Popescu ().