Abstract
Increasing default and bankruptcy in banking sector, has significantly increased the concern of academicians, investors, and research to assess the impact of loan default on financial performance of banking sector. Therefore, main intent of the current research was to critically assess the impact of loan default on profitability of the banking sector, specifically on HSBC Bank Plc in UK. For research method, secondary quantitative approach has been employed, and information was derived on HSBC Plc, while covering period from 1993 to 2022. Regarding variables, NPL as an indicator of loan default was used as an independent variable, and ROA and ROI as an indicator of profitability were used as a dependent variable. For analysis, descriptive, correlation, and linear regression model were used via using SPSS software. Findings shows that NPL has a positive and significant influence on both ROA and ROI of HSBC bank. Thus, it suggested that increase in increase in NPL leads to increase in profitability of the banking sector as well. However, this effect could be result of a proportional relation between the NPL, number of approved loans and profitability. As number of approved loans increases then proportion of NPL would also increase and in the same as profitability. Findings in the current research suggested for future research while integrating both quantitative and qualitative research approach. It also suggested consideration of control variables (i.e., bank size, liquidity, and capital structure) for further detailed analysis..
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