Internal Factors Influencing the Profitability of Commercial Banks in Bangladesh

Hosen, Md. Zakir

doi:10.32861/ijefr.67.192.200

Cited by 5 publications

(5 citation statements)

References 6 publications

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“…LQR, which is metric for meeting short-term obligations from banks' liquid assets, showed the positive but negligible effect on ROA with value of 0.3617 indicating that liquidity has inconsequential effect on profitability. This result corroborates the findings of Nguyen (2022), Koroleva (2021) and Hosen, (2020). Moreover, ROA was significantly but unfavorably impacted by NPLR.…”

Section: Discussionsupporting

confidence: 91%

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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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Section: Discussionsupporting

confidence: 91%

“…The negative sign, denotes an unexpected rise in interest rates, deters bank customers from taking out loans, raises borrowers' interest payments, lowers repayment capacity, raises default rate and lowers banks' profitability respectively. This report is in tandem with Hosen (2020).…”

Section: Discussionsupporting

confidence: 78%

What Factors Drive the Microfinance Banks’ Profitability in Nigeria?

Ademola

2023

GUJR

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“…He came to the conclusion that the loan portfolio has a significant negative impact on the profitability of the bank. Hosen ( 2020 ) investigated 23 commercial banks in Bangladesh and discovered that interest rate spread, capital adequacy, and liquidity are all important factors. Lestaria et al ( 2021 ) discovered that liquidity and leverage have a negative impact on the profitability (ROE), whereas the bank size has a positive impact.…”

Section: Literature Reviewmentioning

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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“…In their study, they showed that highly skilled banks can produce more profit than less competent one; loan growth and diversification affect positively on profitability and funding cost affect negatively to generate profit. Hosen (2020) performed a study in Bangladesh on 23 commercial banks and found that banks' specific factors like interest rate spread, capital adequacy ratio, credit risk, deposit growth, loan to deposit ratio, cost to income ratio and size of the bank significantly affect profitability of banks measured in terms of ROA and ROE. Flamini et al (2009) and Athanasoglou et al (2006) employed bank specific factors like operating expenses, asset quality, management efficiency, bank size, capital Islam / International Journal of Finance &Banking Studies, Vol 10 No 2, 2021 ISSN: 2147-4486 Peer-reviewed Academic Journal published by SSBFNET with respect to copyright holders.…”

Section: Literature Reviewmentioning

confidence: 99%

What Drives Bank Profitability? A Panel Data Analysis of Commercial Banks in Bangladesh

Rana-Al-Mosharrafa¹,

Islam²

2021

IJFBS

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Bank profitability plays a significant role in the growth and development of an emerging economy. The purpose of the study was to examine the impact of bank characteristics, industry concentration and macroeconomics variables on commercial bank profitability in Bangladesh from 2007-2017. Bank profitability is proxied by return on assets (ROA), return on equity (ROE) and net interest margin (NIM). The study is based on secondary data and Hausman test has been performed using STATA software in favor of fixed effect modeling. Panel regressions shows that cost efficiency has significant negative impact on ROA and NIM. The positive impact of loan to deposit ratio with ROA suggests that efficient fund management including investment and assessed expenditure should be emphasized. Bank size has significant negative impact on all the measures of profitability, which indicates that monopolistic competition will reduce banking profit. Credit risk has significant positive impacts on ROE. Industry concentration measured by CR3 is positively related with ROE and has significant negative relation with bank profitability (ROA). Among macroeconomic variables inflation has significant positive and bank spread has significant negative impact on ROE. The coefficients of all the macroeconomic variables have been found to be significantly related to bank profitability while measured by NIM. Our study recommends further research with other explanatory variables such as, corporate governance, corporate social responsibility (CSR) and deposit insurance to accelerate the model and construct the econometric model by using structural equation modeling, mediation effect modeling etc.

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Internal Factors Influencing the Profitability of Commercial Banks in Bangladesh

Cited by 5 publications

References 6 publications

What Factors Drive the Microfinance Banks’ Profitability in Nigeria?

What Factors Drive the Microfinance Banks’ Profitability in Nigeria?

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

What Drives Bank Profitability? A Panel Data Analysis of Commercial Banks in Bangladesh

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