Determinants of Net Interest Margins of Commercial Banks in Kenya: A Panel Study

Tarus, Daniel Kipkirong; Chekol, Yonas B.; Mutwol, Milcah

doi:10.1016/s2212-5671(12)00080-9

Cited by 76 publications

(47 citation statements)

References 20 publications

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“…This suggested that banks interest rate changes have effect on banks profitability. The findings of the paper is consistent with the results obtained by Tarus et al (2012); Were and Wambua (2014) and Njeri, Ombui andKagiri (2014) andMihailov, (2014) who found Interest rate spread in Kenyan and Bulgeria to be influenced by return on assets, net interest income, operational cost and inflation. Despite the phenomenal growth in the financial sector, interest rates are still too high for the average Ghanaian worker and a great majority of Ghanaians are unbanked.…”

Section: Resultssupporting

confidence: 91%

“…His results registered inflation rate, bank rate and the treasury bills rate increase and financial deepening to be associated with the decrease in interest rate spread. Tarus et al, (2012) used pooled and fixed effects regression approached to examine the determinants of net interest margin of commercial banks in Kenya. Their results designated operating expenses and credit risk to have a positive effect on net interest margin.…”

Section: Empirical Literaturementioning

confidence: 99%

“…The findings of this study is also similar to those of Were and Wambua (2014) who revealed that inflation rate highly influences interest rates spread. Tarus et al, (2012) in his study on determinants of interest rates found out that one of the key determinants of interest rates spread was inflation rate and other macroeconomic factors. His findings were similar to those obtained from this study.…”

Section: Descriptive Statistics For the Dependent And Independent Varmentioning

confidence: 99%

See 2 more Smart Citations

Interest Rate Spread on Bank Profitability: The Case of Ghanaian Banks

Owusu-Antwi

Banerjee

Antwi

2017

Journal of Accounting, Business and Finance Research

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The banking sector in Ghana plays a dominant role in the financial sector, particularly with respect to mobilization of savings and the provision of credit. An analysis of bank interest rate spreads is therefore central to the understanding of the financial intermediation process and the macroeconomic environment in which banks operate. This paper is motivated by the fact that although Ghana's financial sector was liberalized in the early 1990s to allow for market determination of interest rates, concerns about high interest rate spreads have persisted and attracted a lot of debate in both public and policy forums. The purpose of the study is to empirically investigate the interest rate spread on banks profitability in Ghana using average annual observation data from1992-2015 to include 28 commercial banks. Ordinary least square was used to estimate the regression coefficients. The empirical results show that bank-specific factors play a significant role in the determination of interest rate spreads in the Ghana's banking sector. All the bank specific variables were found to be significant except Total Assets (TA). Among the macroeconomic variables, inflation was found to be significant whereas GDP growth rate was insignificant. The role of the global financial institutions is changing and so are the banks operating in Ghana. The banking sector should explore new paths that will enable them to take advantage of the government's policy of making the -private sector the engine of growth‖ to market their products.

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Section: Resultssupporting

confidence: 91%

Section: Empirical Literaturementioning

confidence: 99%

Section: Descriptive Statistics For the Dependent And Independent Varmentioning

confidence: 99%

See 1 more Smart Citation

Interest Rate Spread on Bank Profitability: The Case of Ghanaian Banks

Owusu-Antwi

Banerjee

Antwi

2017

Journal of Accounting, Business and Finance Research

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“…Some studies are country-specific (Garcia-Herrero et al, 2009;Saeed, 2014;Ghazouani and Moussa 2013;Gul et al, 2011;Ali et al, 2011;Tarus et al, 2012;Sufian and Habibullah, 2009;Sufian and Chong, 2008;Dietrich and Wanzenried, 2009), while few of them consider panel of countries (Abreu and Mendes, 2002;Staikouras and Wood, 2004;Pasiouras and Kosmidou, 2007).…”

Section: Review and Hypotheses Developmentmentioning

confidence: 99%

Factors affecting bank profitability in Europe: An empirical investigation

Menicucci¹,

Paolucci²

2016

Afr. J. Bus. Manage.

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The aim of this paper was to explore the relationship between bank-specific characteristics and profitability in European banking sector in order to determine the impact of internal factors on achieving high profitability. A regression analysis was done on an unbalanced panel dataset related to 28 European banks over the period of 2006-2015. The largest bank for any single country of the European Union was selected. Regression results show that capital ratio and size have positive impacts on bank profitability in Europe,; while higher asset quality results in lower profitability levels. Findings also suggest that banks with higher deposit ratio tend to be more profitable. The study provides interesting insights into the characteristics and practices of profitable banks in Europe. Few econometric studies have empirically explored the determinants of profitability in Europe banking sector so far, even though similar studies have been conducted in several developed countries.Key words: Bank profitability, determinants of bank performance, internal factors of bank profitability, European banking sector.

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“…Regarding the macroeconomic determinants, the findings reveal that there is a positive and significant association between bank profitability and economic growth, while the association between profitability and inflation is not significant. Tarusa, Yonas, and Mutwolc (2012) examine the factors of NIM of 44 commercial banks in Kenya by using pooled and fixed effects regression to a panel for the period 2000-2009. The empirical results exhibit that credit risk and operating expenses have a significant and positive impact on NIM.…”

Section: Introductionmentioning

confidence: 99%

Determinants of Bank Profitability: Empirical Evidence from Bangladesh

Rahman

Hamid²,

Khan³

2015

IJBM

103

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This study attempts to investigate capital strength, credit risk, ownership structure, bank size, non-interest income, cost efficiency, off-balance sheet activities, liquidity as potential bank specific determinants as well as growth in gross domestic products, inflation as potential macroeconomic determinants of bank profitability by taking 25 commercial banks from Bangladesh for a period ranges from 2006 to 2013. Three different measures of profitability namely return on assets (ROA), net interest margin over total assets (NIM) and return on equity (ROE) are used in the study. The empirical findings suggest that capital strength (both regulatory capital and equity capital) and loan intensity has positive and significant impact on profitability. Results also show that cost efficiency and off-balance sheet activities have negative and significant impact on bank profitability. The impact of other variables is not uniform in respect of different measures of profitability. Non-interest income, credit risk and GGDP are found as important determinant for NIM. Size has a positive and significant impact on ROA. Finally inflation has a negative and significant impact on ROA and ROE.

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Determinants of Net Interest Margins of Commercial Banks in Kenya: A Panel Study

Cited by 76 publications

References 20 publications

Interest Rate Spread on Bank Profitability: The Case of Ghanaian Banks

Interest Rate Spread on Bank Profitability: The Case of Ghanaian Banks

Factors affecting bank profitability in Europe: An empirical investigation

Determinants of Bank Profitability: Empirical Evidence from Bangladesh

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