Determinants of banks’ profitability: Empirical evidence from banks in Ethiopia

Isayas, Yonas Nigussie

doi:10.1080/23322039.2022.2031433

Cited by 44 publications

(36 citation statements)

References 15 publications

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“…The purpose of this study was to investigate the impact of profit determining aspects on the banking industry in Bangladesh and India on governing bank's specific variables and macroeconomic variables. According to Isayas ( 2022 ), there are two indicators of profitability of the banking industry that are returns on assets (ROA) and return on equity (ROE) which are considered dependent variables in this study ( Table 1 ).…”

Section: Research Methods and Proceduresmentioning

confidence: 99%

Profitability determining factors of banking sector: Panel data analysis of commercial banks in South Asian countries

et al. 2022

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Aim of the articleThe main purpose of this article was to investigate the impact of the determinants of profitability on the commercial banks in Asian countries. An Asian country like Bangladesh and India was selected as the research field. The present study also pursues to examine the impact of specific factors and macroeconomic factors on the profitability in the Bangladeshi and Indian private commercial banking sectors.Methods applied and analysis toolsThe data were retrieved from the Annual Reports of Indian and Bangladeshi private commercial banks covering the period of 2010–2021. As sample, 40 private commercial banks were considered randomly, of which 20 were from India and 20 were from Bangladesh. The panel data research methodology was used as an estimation technique to analyze the data. Also, the ordinary least squares (OLS) regression model was used to scrutinize data. To check whether the models were appropriate, the Breusch–Pagan Lagrange Multiplier (LM) Test was employed. Banks' specific factors and microeconomic factors showed almost the same variations for both Bangladesh's and India's private banks. All models and tests were evaluated using E-views econometric software.The major findingsThe present study finds that the Return on Asset (ROA) from the banks' specific variables, strength of the Bank size (BS), and Debt to Asset Ratio (DAR) are found to be positive and significant. For banks, the Deposit to Asset Ratio (DTAR) and the Loan to Deposit Ratio (LDR) are found to be negative and significant. The Equity to Asset Ratio (EAR) and Debt to Equity Ratio (DER) do not have any positive/negative impact.Contribution, originality, and implicationsAs macroeconomic variables, the inflation rate (IR) and the GDP growth rate (GDPGR) are measured and found to be positive and significant for ROA. As macroeconomic variables, the Inflation Rate (IR) and the GDP Growth Rate (GDPGR) are found to be positive and significant in the case of ROA. The concerned authorities responsible for regulating the financial performance of the banking sector can use the results of this study to take various fruitful decisions on bank profitability.

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Section: Research Methods and Proceduresmentioning

confidence: 99%

Profitability determining factors of banking sector: Panel data analysis of commercial banks in South Asian countries

et al. 2022

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“…The bank's profitability is affected by a number of external factors, including internal and external factors that all banks operating in the sector are exposed to, which cannot be controlled, while internal factors are controllable, which the management must control by adopting policies and procedures that will have a positive impact on profitability. The most important of these factors affecting profitability (ownership right, liabilities, volume, liquidity, cash flows, investments, deposits) (Isayas, 2022;Engida, 2023;Kanapiyanova et al, 2023).…”

Section: Profitability Conceptmentioning

confidence: 99%

Analysis of credit risk, liquidity and profitability of the Trade Bank of Iraq for the period (2012-2021)

Abbas

Jawad

2023

Business

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Recently, the global recurrent and diverse crises have increased, and the risks have increased significantly, including the credit risks to the banking sector, and thus the bank has incurred large losses that have an impact on liquidity and profitability. Credit risks may lead to bank's bankruptcy or failure. This research attempts to find the relationship between credit risk, liquidity and profitability together. The data for the Commercial Bank of Iraq were used for a period of ten years. One of the most important objectives of the research is the bank credit, which has a major role in the process of economic development and direct economic activity towards development projects and investment of its accumulated deposits and provide interest for these deposits, and it was concluded that the bank should diversify its investments and increase the granting of loans in foreign currency. Financial restructuring and re-pricing of its shares and the trend in speculation in global markets, and to have investments in the shares of solid international companies to achieve financial flows within it for its balance sheet.

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“…At macro level, a successful MFB is well positioned to weather adverse shocks and make a significant contribution to the sustainability of the whole financial system. Many academics both inside and outside the country have become interested in the discussion about factors that determine commercial bank profitability (Kajola, Olabisi, Ajayi & Agbatogun 2018;Al-Homaidi et al 2018;Isayas 2022) The gap in the literature that has been identified is that, despite the vast number of empirical research on the factors that affect commercial banks' profitability, very few or none of them focused on MFBs in Nigeria on the same topic. This study focused on the Nigerian MFBs that were operational from 2012 to 2021 in order to solve the aforementioned limitations due to their nationwide coverage and data accessibility, this is one of few studies that focuses particularly on Nigerian MFBs profitability over such long period of time.…”

Section: Introductionmentioning

confidence: 99%

What Factors Drive the Microfinance Banks’ Profitability in Nigeria?

Ademola

2023

GUJR

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Banks’ profitability is vital component of economic growth, its significance extends from’ sustainability of banks to macroeconomic stabilization. Thus, this study assessed the effect of banks’ specific factors and macroeconomic variables on the profitability of microfinance banks (MFBs) in Nigeria from 2012-2021. The purposive sampling technique was employed to select 15 licensed MFBs from the South West region of Nigeria. This study employed return on assets (ROA) as an indicator of profitability. Secondary data was elicited from annual published reports of the selected MFBs. Descriptive, regression and correlation techniques were used to analyse data. Findings revealed that MFBs age and size play major roles in the determination of the banks’ profitability; non-performing loans substantially influenced MFBs profitability though adversely. Liquidity rate exerted negligible but positive influence on MFBs profitability. Furthermore, gross domestic product and exchange rate influenced MFBs profitability considerably. In contrast, the Inflation and Interest rate had an adverse but noticeable effect on banks’ profitability. The results provide signifncant directions to banks as well as related policy-makers. Bank management should take cognizance of these salient factors and endeavor to the lower non-performing loans in order to enhance MFBs profitability.

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Determinants of banks’ profitability: Empirical evidence from banks in Ethiopia

Cited by 44 publications

References 15 publications

Profitability determining factors of banking sector: Panel data analysis of commercial banks in South Asian countries

Profitability determining factors of banking sector: Panel data analysis of commercial banks in South Asian countries

Analysis of credit risk, liquidity and profitability of the Trade Bank of Iraq for the period (2012-2021)

What Factors Drive the Microfinance Banks’ Profitability in Nigeria?

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