determining the relationship between credit risk & profitability in iranian banks

in this paper we analyze the relationship between creditrisk & profitability in iranian banks. the credit risk is measured bynon-performing loans ratio &loan; loss provision ratio. also, theprofitability has been measured by return on assets &return; on equity.the survey data are from fifteen iranian banks& credit institutesduring the time period of 2003 to 2009.results show that there is asignificant negative relationship between credit risk & profitability. inother words, the increase in credit risk results in the increase in thecosts of banks and therefore the decrease in their profibility. theresults also imply that bank managers need to focus on monitoring andcontrolling the credit risk in order to maximize their profit.