Determinants of Banks’ Profitability: Evidence from EU 27 Banking Systems

Petria, Nicolae; Căpraru, Bogdan; Ihnatov, Iulian

doi:10.1016/s2212-5671(15)00104-5

Cited by 330 publications

(441 citation statements)

References 22 publications

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“…The variation in the independent variable "Total Capital Ratio %" significantly affects the explained variation in performance of banks in Qatar measured by [18] but the impact of Total Capital in this study is found to be stronger than previous research because of using transformation to address skewness of financial ratios. The variation in the second independent variable "Cost to Income…”

Section: Conclusion and Recommendationscontrasting

confidence: 82%

Determinants of Banks’ Profitability: Panel Data from Qatar

El-Kassem¹

2017

OJAcct

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Purpose: The aim of this paper is to investigate the main determinants of banks' profitability and answer the question "what is the effect of liquidity and risk variables on the explained variation of banks' performance in Qatar?" Design/methodology/approach: A sample of six major lender banks for the period 2008-2015 is retrieved from the worldwide bankscope database. The dependent variable "Return on Average Assets (ROAA)" is taken as a function of independent variables that are basically liquidity and risk variables. Findings: Findings of this study show that variation in the independent variable "Total Capital Ratio %" positively and significantly affects the explained variation in performance of banks in Qatar measured by "ROAA", while variation in "Cost to Income Ratio", negatively and significantly impacts the variation in performance of banks in Qatar. At the same time, variation in "Reserves for impaired Loans/A nonperforming loan (NPL)" and variation in "Loan to Assets Ratio" significantly and negatively affect ROAA of banks in Qatar. Practical implications: It is recommended to replicate the findings of this study in each of the other GCC country before building an econometric model to cluster the GCC banks into homogeneous segments. Originality: The research problem is based on review of literature and investigation in a novel way using EViews 9 and Panel Data.

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Section: Conclusion and Recommendationscontrasting

confidence: 82%

Determinants of Banks’ Profitability: Panel Data from Qatar

El-Kassem¹

2017

OJAcct

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“…Profit is measured by difference of income and costs (static, retrospective), whereas profitability is ratio that shows historical proportions of profit and reflects future profit potential (dynamic, indicating). In addition, much more comprehensive conclusion in such measures is made when information is based on comparisons with other ratios, periods, peers, alternatives and macroeconomic information (Petria et al, 2015). Therefore, several different ratios of profitability are being used in academic literature to achieve sufficient comparability.…”

Section: Literature Reviewmentioning

confidence: 99%

Leading Indicators’ Applicability to Forecast Profitability of Commercial Bank: Case Study from Lithuania

Rauličkis¹,

Jurevičienė²

2018

Trends Economics and Management

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Purpose of the article: Profitability is one of the most important ratios for performance measurement in any competitive commercial bank and key source to fund future working capital and investments needs. This leads to necessity to investigate topics related to profitability and applicability of factors, which would enable to capture latest trends in economy. In scientific literature, leading economic indicators (in addition to financial and lagging/coinciding economic indicators) are suggested as able to capture trends of economic development. However, there is still a discussion going on applicability of these indicators as well as on financial ratios and economic indicators. The problem is relevant from theoretical and practical point of view. Methodology/methods: Quantitative factors for forecasting commercial banks' profitability were identified and tested employing methods of detailing, grouping and quantitative analysis (GMM estimator) in empirical research Scientific aim: To identify applicability of leading economic indicators for bank's profitability forecasting. Findings: Regression analysis of models using blend of bank, industry, economic ratios improves explanatory power in both dimensions -time (higher scores received for all forecasting horizons) and alternatives (different models that use different blends of determinants). Such improvement was found for all forecasting horizons (one, two and three-quarters) resulting improved explanatory power for one, two and three quarters in comparison to models without leading economic indicators. Conclusions: Leading economic indicators can help to better capture forwardd-looking signals, however, to avoid volatility in forecasts they should be employed with careful analysis of their methodologies and in combination with bank and industry specific, lagging and coinciding economic factors.

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“…The results further presented higher level of bank capitalisation, higher operational expenses, and higher net income as factors impacting positively on bank profitability. Petria et al (2015) in an assessment of the determinants of bank profitability in EU-27 over the period 2004 to 2011, used ROA and ROE as bank profitability measures. The empirical results indicate that credit and liquidity risk, diversification of operations, competition, and GDP have a positive effect on bank profitability.…”

Section: Sufian (2009) Assessed the Determinants Of Commercial Banks mentioning

confidence: 99%

Bank-Specific and Macroeconomic Determinants of Commercial Banks Profitability in Ghana

Yakubu¹

2016

IFB

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This study examines the influence of bank-specific and macroeconomic factors on commercial banks profitability in Ghana. The study employed the ordinary least square regression model to analyse the data obtained from the annual financial statements of five commercial banks from 2010 to 2015. The empirical results suggest that bank size, liquidity, capital adequacy, asset management, expense management, and real interest rate are positively related to profitability. GDP growth and inflation rate on the other hand, are related negatively to profitability. However, only bank size, liquidity, and expense management have a significant effect on commercial banks profitability. It can be observed that commercial banks profitability in Ghana is largely determined by bank-specific factors, whereas macroeconomic factors have an insignificant impact on banks profitability for the period considered. Therefore, it is crucial for management of commercial banks in Ghana to efficiently manage the factors that contribute to their profitability in order to enhance superior performance.

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Determinants of Banks’ Profitability: Evidence from EU 27 Banking Systems

Cited by 330 publications

References 22 publications

Determinants of Banks’ Profitability: Panel Data from Qatar

Determinants of Banks’ Profitability: Panel Data from Qatar

Leading Indicators’ Applicability to Forecast Profitability of Commercial Bank: Case Study from Lithuania

Bank-Specific and Macroeconomic Determinants of Commercial Banks Profitability in Ghana

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