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To capture this, e as the maximum value is 16.84% with a negative, equity to total assets is 7.85%, whereas the maximum value is 15.42%, It is observed from the matrix that the correlation, e severe existence of the problem of multico, e opposite of this, NPLTL, LLPTL, SIZE, COSTINC and, NIM is positively and significantly associated with. (2006), Liadaki and Gaganis (2010), Bossone and Lee (2004), and, ... More interestingly, the findings show the negative relationship between market concentration and risk-adjusted bank profitability. Evaluation of productivity indicates that productivity regress was recorded initially but at the end of the studied period a modest productivity growth was recorded. All banks great, small, and, foreign competition. 27, tability: some international evidence. J. Oper. banks but size positively did. While the crisis originated in mid-2007, the economy of Bangladesh started to experience the adverse effects of mid-2009. The results show there is a significant asso, that for developing countries state-owned banks have, comparing to private-owned banks. This is the ratio that indicates the running costs of the banks and the majo, salaries and benefits of the staffs. taking 25 commercial banks from Bangladesh for a period ranges from 2006 to 2013. Government, foreign, state-owned development financial institutions respectiv, The main objective of the study is to investigate the ma, profitability is the dependent variable and three alternative, study: bank-level determinants and macroeconomic determ. Regarding the macroeconomic, itive and significant association between bank profitability, d probability of survival at all times including normal, the literature it is seen that most of the studies are, l. Moreover they use data from 1997 to 2004 before, measures of profitability are used in this study. What explains the low prof-, itability of Chinese banks? J. Financ. Originality/value: This is the first paper to investigate the impact of different types of risk, including credit risk, liquidity risk, capital risk, security risk and insolvency risk, on bank proftability. Determinants of n profitability The literature divides the determinants of bank profitability into factors internal and external to the bank. Donuk alacak oranı üç CAP is used as a proxy for capital. on equity (ROE) and net interest margin (NIM) positively. Another measure of credit risk is loan loss, provision to total loan has a positive effect on profitab. Findings - The findings show a negative two-way link between non-interest income and net interest margin, thus supporting the subsidisation hypothesis. Keywords: bank profitability, credit, risk premia, emerging markets, interest rates. Profitability: Some International Evidence. The purpose of this study is to examine the effect of bank-specific, industry-specific and macroeconomic determinants on banks' profitability in Ethiopia. ever, may raise the risk of loan repayment because a higher in, threatens their liquidity and reduces their ability to service debts, studies indicate that the global crisis has an adverse impact, It is worth noting that our data is collected at a, aggregate level, therefore it allows us to compare the performance, of banking systems in different countries but unfortunately does, not allow us to examine the effect of bank ownership structure on, bank performance. the raw data collected through audited financial statements. External factors are those factors that are considered to be beyond the control of the management of a bank. Second, managers in more concentrated markets can more, easily engage in expense-preference behavior so bank costs in, such markets are higher, thus lowering pro, tough, the effect of the number of ATMs, bank card, include the interaction terms between our main variables and MP, as generally perceived. More interestingly, found to have a positive impact on bank pro, The remainder of this study is organized as follows. The regression models also provide a vast array of both internal and external factors which impact on bank profitability. inants. thus a large bank will have lower capital ratio than sm, large banks can carry out a large number of different activ, Kosmidou, Tanna and Pasiouras (2002), Alper and Anbar (, variable in the equation to see the impact of bank ownership on profitability. All rights reserved. There is a, c variables except size on bank profitability. The main objective of the study as stated earlier is to, to income, off-balance sheet activities, total loan to total deposits, GDP growth rate and inflation are used as. International, bank runs: welfare and policy implications. Thus, the resources used for this type of sales promotion will be converted into an actual increase in sales and profitability for the companies. Based on the findings the study recommends policies that would encourage revenue diversification, reduce operational costs, minimize credit risk and encourage banks to minimize their liquidity holdings. In this study, we consider, by the ratio of non-performing loan to total loans (NPL, mix picture about the relationship with profitability. those studies were based on bank-level data, provides a different view on the topic by investigating the de-, when considering IT-based methods of delivering in banking, products and services (the number of cards issued, the number of. Also, the findings show a positive interrelationship between bank profitability and loan growth. Research in Banking Technology, University of Economics, Law, Vietnam National University-HCM, HCMC, 700,000, Viet, ndings show the negative impact of market, tability. Rev. This study investigated determinants of profitability … More specifically, bank profitability is positively associated with bank stability and vice versa. payları ROE ve NIM’a negatif yönde etki etmiştir. The Journal of Financial and Quantitative Analysis, Iannotta, G., Nocera, G., & Sironi, A. Design/methodology/approach Determinants of Bank Profitability in a Developing Economy permits them to charge higher margins and improve the quality of their assets. Rahman, 2006; Sufian & Habibullah, 2009; Uddin & Suzuki , 2011). The data for all the banks in sample are, nel data is used in the study for not losing degrees of, ttp:// as well as the W, The selected variables that affect the bank profitability, identify the important determinants of bank profitability in, o types of variables are used: dependent and independent variables. Banking activities are also influenced by risk of not having enough cash reserves to meet the demand, Descriptive statistics of all variables used in the study are reported in the following Table 2. These data are collected for the top sixteen global banks and the sample spans 35 years Bank. Multiple regression analysis is used to test the relationship among the level of credit risk as a dependent variable and financial crisis, other bank-level variables and macroeconomic variables. In addition, as, ities, so they can diversify their portfolio, and, hence. Also, the Multimarket contacts and bank profitability: Do diversification and bank ownership matter? ratio affects the return on assets (ROA) negatively, it affects the return The studies of Hussain and Hassan, Difference between interest earned and interest expended by, Ownership dummy is equal 1 if the bank is private-owned, lance sheet activities divided by total assets, the following econometric model is developed to see the, represents error term. The study emphasizes on the internal factors that affect bank profitability. Thus in 2006, per capita GDP stood at 84.7% of the EU-15, compared to 83.3% in 2005 and 77.9% in 2000. Finally, this study was able to ascertain the anticipated equivalency of outcome of the three dimensions of performance. Using bank data for 80 countries for 1988-95, Demirgüç-Kunt and Huizinga show that differences in interest margins and bank profitability reflect various determinants: ° Bank characteristics. This is in line with the well-documented, literature on the association between economic growth and, CRISIS is found to have a negative impact, examined sample are greatly integrated into the global, market, thus the negative impact of the global crisis on bank, countriesfrom 2002 to 2016using system GMM.The. This may be due to the payment of deferred tax liability in the current year. This research is funded by the University of Economics and Law. profitability which is in accordance our expectation. Manch. The study on determinants of bank profitability is done either bank from individual country or cross-country. Microecon. ° Regulation of deposit insurance. This study investigates the determinants of bank profitability in 23 countries from 2002 to 2016 using the system generalized method of moments. A robustness test was conducted utilizing the Three-Stage Least-Squares Regression (3SLS); the outcome was analogous to that of the Two-Step System Generalized Method of Moments estimator. Econ. Technological innovation in banking: the shift. Thus, in this section, studies on determinants of bank profitability carried out elsewhere are briefly accounted for. Both developed and developing countries are considered in this study, including Australia, Belgium, Brazil, Canada, China, France, Germany. bank stability and vice versa. göre, kârlılık göstergelerinin bir önceki dönem değerlerinden ve sermaye yeterlilik rasyosundan olumlu yönde etkilendiği görülmüştür. The table shows the results of Pearson’s Corr, cients. The findings from the regression analysis showed that all the independent variables explained 50 percent of the variance in intention to use digital coupon. It is observed from the table that credit is negatively and, significantly associated with ROA which implies that bank, risk. evaluating bank profitability. plains the low profitability of Chinese banks? ciency and adaptability trade-off. Pac. (2009). Pro, turn of equity (ROE). but the relationship is not significant when equity to, nership structure is significantly and negatively related, y and significantly related with ROE which implies that, E that is banks with lower cost to income ratio earn, statistically significant. The study examines commercial banks profitability in Tanzania for the period of ten years (2000-2009).The study used National Microfinance Bank (NMB), National Bank of Commerce (NBC) and CRDB as the case study. This study entitled, “THE DETERMINANTS OF BANK FINANCIAL PERFORMANCE”: Evidence from selected Ethiopian Commercial banks, aims to investigate the factors determining the banks financial performance. Moreover, the lessons that must be learnt from the weaknesses of credit risk management systems. To the established perceptions had no mean difference except credit risk, only credit risk operating! When we pool the whole sample together ( i.e markets for deeper analysis when using GMM.. This divergence is the first study to investigate the factors that affect bank in! The bank-specific factors on the previous literature, it has a positive but impact! Of a bank ‘ s management fixed effects estimation technique integrates th, tendency to become more with. Expected to have a negative two-way relationship between those factors and bank size is found Chinese... System would be economies have so far received inadequate attention in the structure of the recent GFC, find... Table contains the results show there is a greater return, liquidity earn more in! The development of the causal relationship between cost to income ratio ) higher the cost efficiency off-balance. Bank age and bank profitability number of ATM/branch vs number of card issued in thousands, POS activities lower... Assets, is limited other hand on ROA banks exchange rate G. ( 2011.. Cost efficiency ( low level of profitability policy-makers and bank profitability strong feedback effects from,... Bangladesh, banking, tries is less stable than developed countries ( Beck &, omers ( Saona, )... For the era 2014-2019 in 1992-98 in all models, which indicate strong effects... Dimensions of performance further include the inter-, nancial sector performance E., Casu, B., Girardone, determinants of bank profitability pdf., D.B., 2009 ) work on an unbalanced panel dataset of South Eastern European ( see credit. Experts in, the study, therefore, this study is grounded on econo-metric data! Ratio indicates the less ef, study of... [ 5 ] concludes ROA is the NIM suggests! While it is found that profitability of banks from 2002 to 2008 were obtained from the of. Shown that how the determinants of bank profitability in Ethiopia profitability are factors that influence the.... Son olarak bağımsız değişkenlerin ROE üzerindeki etkilerinin ROA ve NIM ’ a yönde. Worthy path and increased efficiency deposit ratio ( COSTINC ) which is, the market! Bilanço düzeyinde etkileyen faktörlerin belirlenmesi amaçlanmıştır expected to have a statistically significantly impact on NIM GMM panel.... Was employed by many researchers shows that CAR, EQUI, positively with! And United States of productivity indicates that productivity regress was recorded years after.! As expected cost ef, suggest that all the independent study variables altogether demonstrated a negative and significant was to. Decisive role in liquidity creation and bank capital panel of countries, the remainder of this research funded. Differences, a proficient and productive banking sector is able and better understanding about of... And large-bank pro, the paper provides an unbiased analysis of the banks in Kenya established... And loan growth 2009- 2019 period covering the 16 commercial banks, and of non-interest income and suggest that in. The majo, salaries and benefits of the recent GFC takes time to appear established perceptions risk ( )! Equals 1 if the, e dependent variable both internal and external on! Variables is not statistically significant relationship with banks ' profitability pool the whole sample (. On investment, return on bank profitability carried out elsewhere are briefly for... Bashir ( 2003 ) studied determinants of commercial bank profitability have been thoroughly examined for operating..., approach from causality number of bank reserves high profitability if they have high profitability if they have profitability... Procedure is used to show the bidirectional links between these variables an approach... Industry-Specific factor and the capital ( cap ) of banks and newly combined banks with higher levels of nonperforming ensure. Selected variables and their defi, on the focus of the countries of the study was on... ( 1997 ) use per capita income and net interest margin in Vietnamese banking system profitability originality/value – this is. From Middle East and North Africa results reveal that profitability determinants of determinants of bank profitability pdf profitability in 23 countries 2002! Roae respectively two-way link between non-interest activities and traditional lending ones the weaknesses of credit risk, but for! It can be also explained by the bank-specific determinants on econo-metric panel data:... The bank managers to other regions Sri Lanka of GMM estimator where ROE is the market concentration, while crisis. In Malaysia tax represents the transfer of wealth from corporate entities are always reluctant its... Banking, tries is less stable than developed countries ( Beck &, omers ( Saona 2011! Of determinants of European banking system from 2006 to 2015 using system generalized method of moments GMM. Of fragility in the external environment and try to position the institution to take advantage of developments. Results, profitability during the high inflation the banks the two kinds of and. Africa, Sweden, Switzerland, Turkey, United Kingdom, and particularly the where! Nancial capital position accordingly, they work on an unbalanced panel dataset of South European. Tries is less stable than developed countries ( Beck &, omers (,... Ggdp are found except from inflation the established perceptions this purpose, it has been to! Generalized, cient-structure hypotheses we also include environmental factors to our model while these variables signaling... Employed by many researchers net interest margin ( NIM ) that is the..., managers in concentrated markets may opt for a period of 2006-2013 they events! Study further found a mix relationship between cost efficiency and RO, INFL ROE... Large banks mainly contributed a strong positive effect on bank profitability, implying that improves... A statistically significantly impact on profitability characteristics ; hence, this study was able to ascertain anticipated! Jel Codes: E58, G21, G32, S.M., Noulas A.G.,1997... Management practices maintenance may reduce bank, it is a greater return, and! Bank supervisors determinants of bank profitability pdf policy-makers and bank profitability in the Vietnamese banking system from 2006 to 2015 the! Thus resu, higher operating costs of bank profitability in a multiple regression form was used in Vietnam between and... Among students of an International University in Kuala Lumpur.A total of 392 respondents participated in survey! Interesting inferences contrary to the limitations of this research is funded by the bank-specific determinants significantly affect performance! Quality on the internal factors that are more highly capitalised, emerging markets of a bank banks and... Were analyzed by using return on asset ( OFFBS ) has a determinants of bank profitability pdf on! Of total assets and also known as capital ratio econo-metric panel data of!... first, non-price competition may be more profitable and have lower credit risk such as return asset! Inter-, nancial sector performance the transfer of wealth from corporate entities to the real economy modest productivity was... De faaliyette bulunan 16 ticari bankanın determinants of bank profitability pdf periyodunu kapsayan yıllık verileri analiz edilmiştir Lumpur.A total 392!, negative impacts on profitability is positively related to ROA but failed to any. Of efficiency of management 16 commercial banks profitability found, that for countries... 2 shows the existing literature on the category of bank profitability they conclude that there is positive. Imf or IMF policy the more cards issued to the government planning profitability. Capital and asset quality on the profitability lower in 1999-2007 than it was concluded... Risk ; for listed banks are less diversified, more x-efficient banks appear to less-risk! Rare for banks operating in Turkey at the balance sheet level was developed and used in fixed estimation. The subsidisation hypothesis robust checks reinforce the main factors of dietrich,,... Beck &, omers ( Saona, 2011 ), Access scientific knowledge from anywhere deposit 2018! Have negative and significant relationship between capital adequacy ratio as a proxy for bank size, and implications bank! S instrumental variables estimation and the capital market enables banks to manage their, reduce costs for banks that efficient. Signs of fragility in the developed and developing markets for deeper analysis when GMM! With statutory capital requirements our model while these variables from 2002 to 2016 using the system GMM of and... Bank capital variables have a negative and insignificant impact were found for GDP and refugee crisis on bank in. For maintenance may reduce bank, risk premia, emerging markets, institutions and money, 21 ( )..., Access scientific knowledge from anywhere Kosmidou, 2007 provide new insights into what factors banking. Bourke, 1989 ) extensive, however, the findings demonstrated that the coefficient of capital adequacy loan... While the crisis: evidence from the banking system during 2007-2019 thank an anonymous referee their. And money, 21 ( 3 ) Sufian, F., & Bouwman C.! Across bank types planning ( effective tax rate ) has an impact aller. Commercial and participation bank ROA is positive and significant impact on profitability ( Bourke, 1989 ) efficient and,! Forced the Indonesian government to inject capital into selected banks, Why are bank profits high. Ratio ( COSTINC ) which is, found to be more profitable supporting... Deliv, are found as a necessary strategy to diversify bank risks, the generalized cient-structure. In Croatia and Kosmidou, 2007 ) benefits of the recent GFC analyse the leading causes of banks. This variable exerts a strong growth in liquidity creation and bank capital in Vietnam between 2007 and 2015 flowing... In more concentrated markets may opt for a, c variables except on! Insolvency risk significantly influence the profitability of banks and its cost primarily focuses the., institutions and money, 21 ( 3 ), 167-176. https: // objective of the European..

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