An Assessment of the Impact of Retail and Corporate Credit Risk on the Performance of Egyptian Banks: The Moderating Effect of Bank Efficiency

Abstract

Banks play an important role in promoting economic growth by acting as financial intermediaries reallocating financial resources to the most productive investments.However, banks confront different types of risks that must be closely monitored to avoid unexpected losses that could jeopardize the banks' viability. In this regard, the article observed that credit risk in terms of corporate and retail has recently increased dramatically in Egypt, and they are not synchronized over time, indicating that the determinants may be distinct. Furthermore, the analysis found no papers in the literature that split credit risk into retail and corporate before assessing bank performance in Egypt. As a result, the paper aimed to investigate the impact of retail and credit risk on bank performance using the GMM for the period 2011-2020 to provide improved insights to Egyptian banks that would aid in their projection of future bank performance. The findings demonstrated that classified credit risk has varying effects on bank performance, highlighting the need to categorize credit risk to construct more robust estimated models of bank performance.