Commercial Banks Profitability Position: The Case of Tanzania

Abstract

The study examines commercial banks profitability in Tanzania for the period of ten years (2000)(2001)(2002)(2003)(2004)(2005)(2006)(2007)(2008)(2009).The study used National Microfinance Bank (NMB), National Bank of Commerce (NBC) and CRDB as the case study. The study employed the profitability measures of commercial banks, and the evidence of performance in terms of profitability was established based on return on average asset, net interest income to average bearing assets and non-interest expenses to average assets. The paper utilized panel secondary data from National bank of commerce, CRDB and National Microfinance bank in Tanzania for the period of ten years, and the hypothesis was tested to know whether there is a significant difference in terms of profitability by using ANOVA test. Finally the regression model was run to see the effects of capital adequacy, liquidity and asset quality on the profitability of commercial banks. The findings revealed that there is no significant difference on profitability among the commercial banks, in the context of regression model it has been noted that liquidity and asset quality has positive impact in profitability with exception to the level of nonperforming loans which has a negative influence on profitability. Also capital adequacy has shown negative impact on profitability. The study confirmed the profitability of commercial banks to stable and meeting the regulatory requirement of the Bank of Tanzania (BOT).

Determinants of Bank Profitability: Empirical Evidence from Bangladesh

“…Some studies show that there is a positive relationship between capital and bank profitability (Berger 1995;Demirgüc-Kunt & Huizinga, 1999;Hassan & Bashir, 2005;Athanasoglou et al, 2008;Dietrich & Wanzenrid, 2009;Davydenko, 2010;Olweny & Shipho, 2011;Ani, Ugwunta, Ezeudu, & Ugwuanyi, 2012;Rao & Lakew, 2012). On the other hand, some studies show that there is a negative relationship between capital and bank profitability (Saona, 2011;Ali, Akhtar, & Ahmed, 2011;Qin & Pastory, 2012). Therefore it can be said that the impact of capital on profitability cannot be anticipated theoretically.…”

The Effect of Bank Specific and Macroeconomic Determinants of Banking Profitability: A Study on Bangladesh

“…However, Masood and Ashraf (2012) finds the capital adequacy highly significant and negatively relates with return on equity. Moreover, Qin and Dickson (2012) finds that capital structure has a negative determinant on profitability. High capital adequacy may lead of low profitability if investors are rigid to make great investment to avoid the losses in future where as it leads to high profitability if banks can avoid the payment of fixed interest expenses but dividends payments is optional can be paid or not paid.…”

“…Therefore, investigation of the determinants of profitability is vital for the growth and stability of the whole economy. Considering the importance of banking profitability many studies have been conducted focusing both single country and cross country such as Hassan and Bashir (2003) 21 developing countries where islamic banking has been praticed, Samad (2004) for Bahrain, Kosmidou et al (2005) for UK, Athanasoglou et al (2008) for Greece, AL-Omar and AL-Mutairi (2008) for Kuwait, Heffernan and Fu (2008) for China, Wasiuzzaman and Tarmizi (2010) for Malaysia, Qin and Dickson (2012) for Tanzania, Wasiuzzaman and Gunasegavan (2013) for Malaysia, Francis (2013) for Sub Sahara Africa, Masood and Ashraf (2012) for twelve Muslim countries, Perera et al (2013) for four South Asian courtiers in order to investigate the determinants of banking profitability. The studies reveal that both bank level and macro level factors are importantly determine the profitability of the banking system of a country.…”

Bank-Specific and Macroeconomic Determinants of Commercial Banks Profitability in Ghana

“…Most studies conducted on bank profitability (for example; Khrawish, 2011;Qin & Dickson, 2012;Flamini et al, 2009) have used ROA, ROE, and Net Interest Margin (NIM) as the possible profitability measures of banks. In this study, ROA is used as a measure of bank profitability.…”