Profitability of commercial banks revisited: new evidence from oil and non-oil exporting countries in the MENA region

Abdullah, Nermeen; Tan, Yong

doi:10.21511/imfi.14(3).2017.06

Cited by 9 publications

(1 citation statement)

References 35 publications

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“…Pre- and post-crisis researches using the same bases to analyze bank profitability (Athanasoglou et al, 2006 ; Brei et al, 2020 ; Budhathoki et al, 2020 ; López et al, 2020 ; Tercero-Lucas, 2020 ) showed similar results. The global financial crisis has had a favorable impact on bank profitability (Abdullah and Tan, 2017 ).…”

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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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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Risk management, diversification, and profitability of commercial banks in Central Africa

Zogning

Lenga²

2022

J Corp Accounting Finance

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This article examines the impact of bank risks and diversification on the profitability of commercial banks in Central Africa. The results indicate that the credit risk and liquidity risk have a negative impact on the profitability of these banks. Moreover, credit risk is reduced more through credit rationing than through an in-depth examination of the borrowers' profile. Lastly, banks use diversification to compensate for revenues lost because of credit rationing.

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Investigating into the dual role of loan loss reserves in banking production process

Fukuyama

Tan

2021

Ann Oper Res

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This paper considers the use of loan loss reserves (LLRs) in the banking production process and treats it as one variable with a dual role. We establish a three-stage network Data Envelopment Analysis model to address this issue. Using a sample of 43 Chinese commercial banks over the period 2011–2019, the results show that the banks with the ratio between LLRs and total loans less than 1% have higher level of efficiency compared to the ones holding the ratio greater than 1%. The results show that when excluding LLRs in the production process, the efficiency scores are significantly inflated. We find that small and medium sized banks are more efficient than their big counterparts, however, the results show that big banks hold more than enough amounts of LLRs than the one required by the regulatory authority. When LLRs are excluded from the production process, it shows that big banks perform better than small and medium sized banks. Our findings show that less liquid banks perform better than the ones with higher levels of liquidity no matter in which way LLRs are treated. Finally, we find that lower capitalized banks, compared to the ones with high levels of capitalization, are less efficient. however, it shows that higher capitalized banks consistently keep more than 1% LLRs out of total loans.

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Profitability of commercial banks revisited: new evidence from oil and non-oil exporting countries in the MENA region

Cited by 9 publications

References 35 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

Risk management, diversification, and profitability of commercial banks in Central Africa

Investigating into the dual role of loan loss reserves in banking production process

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