The Impact of Bank-Specific Characteristics on the Profitability of Commercial Banks in Egypt

Abstract

The purpose of this study is to investigate the relationship between bank-specific factors and the profitability of banks in Egypt. Thus, finding the main internal characteristics for achieving higher profitability. In this research, OLS regression analysis is used to examine the relationship between bank-specific characteristics and bank's profitability for a sample of 19 Egyptian banks during the period 2007-2016. The findings reveal that bank size and loan loss provision ratio are the main determinants of bank's profitability, by showing a significant relationship with all measures of profitability. Capital ratio shows a significant relationship with ROA and NIM, but insignificant with ROE. However, Loan ratio and deposit ratio have an insignificant effect of bank's profitability.

Bank Specific Factors and Bank Performance: Evidence from Nigeria

“…The finding of asset quality is consistent with the study of Rahman et al (2015) and Kamande et al (2017), which revealed that the bank's asset/deposit component has a significant effect on the profitability of the banks. Nevertheless, this result is inconsistent with the study by Kassem & Sakr (2018) that illustrate a non-significant impact on banks' performance. Poor asset quality will negatively impact banks' profitability (Salike & Ao, 2018).…”

“…These factors include capital, size of deposit liabilities, the composition of the credit portfolio, Interest rate policy, labor productivity, state of information technology, risk level management quality, bank size, and ownership, among others (Dang, 2011). All these individual bank attributes tend to influence bank performance either in terms of Asset Quality (growth deposit, bank size, and credit risk) or Liquidity Ratio (loan ratio, deposit ratio, and interest expenses) (Kassem & Sakr, 2018;Roman & Sargu, 2015).…”

Empirical analysis of impact of macroeconomic indicators on Profitability of Islamic Banking Industry in Pakistan

“…These outcomes propose that advancements in overall practices of the management and new models in financial risk and operating efficiency the executives are necessary to improve profitability of Islamic banks. Kassem and Sakr's (2018) study has discovered examining the connection between bank-explicit components and the productivity of Egyptian banks. In this manner, there was finding that the primary inward qualities for accomplishing higher productivity remain important to be understood.…”

“…The theories related to the credit risk have indicated that the increase in the credit risk causes negative impact on the profitability of the banks. Interest rate (IR): Interest rates effect on the bank's profitability and Discount rate has been used for analysis (Kassem & Sakr, 2018). Coming to the control variables, some of the bank specific and macroeconomic indicators which are used for the analysis are defined below, Efficiency Ratio (ER): The efficiency ratio is used to calculate the efficiency of the banks by using the ratio between the administrative expense and profit before tax.…”

“…The spread ratio is calculated through dividing the net markup to markup. GDP growth rate (GDP): The GDP is the growth in the activities of the economy, where the inflation has already been adjusted (Kassem & Sakr, 2018). Exchange Rate (ER): It refers to the value of the currency of one country against which it has been converted to other currencies.…”