The Impact of Non-Performing Loans on Total Revenues and Net Profit after Tax: An Econometric Study of Iraqi Banks

            The Banks face a variety of complex risks, with non-performing loans (NPLs) being among the most critical due to their direct impact on both financial stability and profitability. Accordingly, the central research question of this study is: What is the impact of non-performing loans on the income statement items, namely total revenues and net profit after tax, in Iraqi banks? To address this question, the study aims to measure the effect of NPLs on these two items while controlling for net credit, deposits, and equity. The analysis employs econometric methods based on unbalanced panel data models. The study sample comprises 26 Iraqi banks listed on the Iraq Stock Exchange during the period 2010–2024. The results of the optimal model, identified as the robust fixed effects model, reveal a significant negative impact of NPLs on both total revenues and net profit after tax. Conversely, deposits had a significant positive effect, whereas neither net credit nor equity showed a statistically significant effect. These findings underscore that NPLs represent a major challenge to the stability and profitability of banks, highlighting the need to review lending policies, adopt advanced tools for creditworthiness assessment, diversify loan portfolios toward sustainable productive sectors, and strengthen internal control mechanisms to reduce NPL accumulation and ensure the long-term sustainability of the banking sector.