1. I
THE RISK FACTORS OF COMMERCIAL BANK IN KOTA BHARU,
KELANTAN
NURUL HANIS BT KHAIRUL ANUAR
2013901415
BACHELOR OF BUSINESS ADMINISTRATION
WITH HONORS (FINANCE)
FACULTY OF BUSINESS MANAGEMENT
UNIVERSITI TEKNOLOGI MARA
KOTA BHARU CAMPUS
DECEMBER 2015

2. II
THE RISK FACTORS OF COMMERCIAL BANK IN KOTA BHARU, KELANTAN
NURUL HANIS BT KHAIRUL ANUAR
2013901415
Submitted in Partial Fulfillment
of the requirement for the
Bachelor of Business Administration
With Honors (Finance)
FACULTY OF BUSINESS MANAGEMENT
UNIVERSITI TEKNOLOGI MARA
KOTA BHARU CAMPUS
DECEMBER 2015

3. III
BACHELOR OF BUSINESS ADMINISTRATION
WITH HONORS (FINANCE)
FACULTY OF BUSINESS MANAGEMENT
UNIVERSITI TEKNOLOGI MARA
“DECLARATION OF ORIGINAL WORK”
I, (NURUL HANIS BT KHAIRUL ANUAR), IC NUMBER: (900714-03-5162)
Hereby, declare that;
being concurrently submitted for this degree or any other degrees.
project paper is the result of our independent work and investigation, except
where otherwise stated.
information have been specifically acknowledged.
Signature: _______________________ Date: _____________________

4. IV
LETTER OF SUBMISSION
Nurul Hanis Bt Khairul Anuar
2013901415
The Head of Program
Bachelor of Business Administration with Honors (Finance)
Faculty of Business Management
Universiti Teknologi MARA
Kampus Kota Bharu
Wisma KUB
Jalan Sultan Ibrahim
15050 Kota Bharu
Dear Sir/Madam,
SUBMISSION OF PROJECT PAPER
Attached is the project titled ― THE RISK FACTORS OF COMMERCIAL BANKS IN KOTA
BHARU, KELANTAN” to fulfill the requirement as needed by the Faculty of Business
Management, Universiti Teknologi MARA.
Thank you,
Yours sincerely,
…………………………
NURUL HANIS BT KHAIRUL ANUAR
2013901415
Bachelor of Business Administration with Honors (Finance)

5. V
ACKOWLEDGEMENT
Alhamdulillah, first of all I would like to thank ALLAH S.W.T as finally I was able to finish my
final year project paper. This task had been done with afford by myself even though a little bit
problems can be settled down and I was able to adapt properly and wisely.
Besides that, big thank I’m address to my lovely advisor MOHAMAD HANIF B. BAHARUDIN
because without his guide, my project paper cannot be done properly like this. He always gives
supports and guide to me how to do this project paper in purpose to produce a good outcome
from research that have been studied. I’m already analyze and discussing about the risk factors of
commercial banks in Kota Bharu, Kelantan.
Last but not least, I’m also want to dedicate a thousand of thank you to my parent who are
always giving me an advance and give me a spirit to complete this task. Besides that, thank you
to anyone that participates directly or indirectly in completed this report. Without their
commitment and support, this thesis final year project paper would not complete successfully.

6. VI
TABLE OF CONTENTS
Page
TITLE PAGE I-II
DECLARATION OF ORIGINAL WORK III
LETTER OF TRANSMITTAL IV
ACKNOWLEDGEMENT V
TABLE OF CONTENTS VI-VIII
LIST OF FIGURES IX
LIST OF TABLES X
ABSTRACT XI
CHAPTER 1 INTRODUCTION
1.1 Background of Study 1-3
1.2 Problem Statement 4-5
1.3 Research Objectives 6
1.4 Research Question 6
1.5 Theoretical Framework 7
1.6 Research Hypothesis 8-9
1.7 Significance of Study 9
1.8 Scope of Study 9-10
1.9 Limitations of Study 10-11
CHAPTER 2 LITERATURE REVIEW
2.1 Literature Review of Liquidity and Interest Rate
Risk, Credit Risk, Exchange Rate Risk 12-18
CHAPTER 3 RESEARCH METHODOLOGY
3.1 Research Design 19

7. VII
3.2 Sampling Design
3.2.1 Population 19
3.2.2 Sample 20
3.2.3 Collection Technique 20
3.3 Data Collection Method
3.3.1 Primary Data 20
3.3.2 Secondary Data 21
3.4 Data Analysis
3.4.1 Statistical Procedures of Social System
(SPSS) 21-22
CHAPTER 4 FINDINGS AND ANALYSIS
4.1 Demographic (Respondents’ Profile) 23-29
4.2 Reliability Analysis (Cronbach’s Alpha)
4.2.1 Commercial Banks’ Performance 30
4.2.2 Liquidity and Interest Rate Risk 30
4.2.3 Credit Risk 31
4.2.4 Exchange Rate Risk 31
4.3 Pearson Correlation Analysis 32-33
4.4 Descriptive Analysis 33
4.5 Regression Analysis
4.5.1 Coefficient of Correlation (R) 34
4.5.2 Coefficient of Determination (R²) 34
4.5.3 F-Test (ANOVA) 35-36
4.5.4 T-Test 36-39
4.6 Autocorrelation Test (Durbin Watson) 39

8. VIII
4.7 Hypothesis Testing 39-40
CHAPTER 5 CONCLUSION AND RECOMMENDATION
5.1 Conclusion 41-42
5.2 Recommendation 43-45
REFERENCES 46-48
APPENDICES 49-56

9. IX
LIST OF FIGURES
Figure: Page
Figure 1.4 Theoretical Framework 7
Figure 4.1.1 Gender 23
Figure 4.1.2 Age 24
Figure 4.1.3 Educational Level 25
Figure 4.1.4 Monthly Income 26
Figure 4.1.5 Department 27
Figure 4.1.6 Employment Status 28
Figure 4.1.7 Working Experience 29

10. X
LIST OF TABLES
Table: Page
Table 4.2.1 Commercial Banks’ Performance 30
Table 4.2.2 Liquidity and Interest Rate Risk 30
Table 4.2.3 Credit Risk 31
Table 4.2.4 Exchange Rate Risk 31
Table 4.3 Correlation 32-33
Table 4.4 Descriptive Statistics 33
Table 4.5 Model Summary 34
Table 4.5.3 ANOVA 35
Table 4.5.3.1 F-Statistics 36
Table 4.5.4 Coefficients 36
Table 4.5.4.1 T-Test for Liquidity and Interest Rate Risk 38
Table 4.5.4.2 T-Test for Credit Risk 38
Table 4.5.4.3 T-Test for Exchange Rate Risk 38
Table 4.6 Durbin Watson 39
Table 4.7 Hypothesis Testing 39-40

11. XI
ABSTRACT
This research was aim to study on the risk factors of commercial banks. The objectives of this
research are to identify what are the risk factors of Commercial Banks. Other than that is to study
the association of the risk factors which consist of Liquidity and Interest Rate Risk, Credit Risk
and Exchange Rate Risk to Commercial Banks’ Performance. Another objective is to explain the
relationship between the risk factors and Commercial Banks’ Performance. The target of
population is people who are the commercial banks’ staff that are living in Kota Bharu with the
sample size of 120 respondents. Descriptive study was used as the research design since the
researcher used primary data which is questionnaire for data collection. The researcher used
SPSS software to analyze the data. From the result obtained shows that Liquidity and Interest
Rate Risk, Credit Risk and Exchange Rate Risk are significantly related to Commercial Banks’
performance.