The Effect of Credit Risk on Banks Profitability in Egypt”: Does Cyber Risk Matter?

Abstract

In the ever-changing environment of banking and finance, it is important for both institutions and regulators to understand how one risk factor influences another and how these interactions affect profitability. This study investigates whether credit risk impacts Egyptian banks' profitability, with cyber risk acting as a moderator. A quantitative research design is adopted using panel data from 17 Egyptian commercial and public banks covering the period 2017–2022. The findings reveal that cyber risk significantly moderates the relationship between credit risk and profitability, mitigating the negative effect of credit risk on return on assets (ROA). Specifically, while an increase in credit risk typically reduces profitability, higher levels of cyber risk—often indicative of more robust risk management and digital infrastructure—appear to cushion this adverse effect. However, the study is limited by data availability, as it does not include observations beyond 2022, and by its focus on the Egyptian banking sector, which may limit generalizability. The practical implications suggest that strengthening cyber risk management systems can serve as a strategic tool for banks to buffer consequences of financial risk exposures, particularly credit risk.