scholarly journals An empirical analysis of the determinants of the U.S. banks’ profitability

2021 ◽  
Vol 16 (4) ◽  
pp. 209-217
Author(s):  
Chiaku Chukwuogor ◽  
Emmanuel Anoruo ◽  
Ikechukwu Ndu
Keyword(s):  
Economic Growth ◽  
Unemployment Rate ◽  
Generalized Method Of Moments ◽  
Loan Loss ◽  
Bank Profitability ◽  
Macroeconomic Variables ◽  
Net Interest Margin ◽  
Mortgage Rate ◽  
The U.S ◽  
Interest Margin

This study investigates the determinants of the profitability of U.S. banks. Employing quarterly data, this paper further examines the historical and recent trends for all U.S. banks from 1996 to 2019 in the relationship between return and assets (ROA) and other bank internal (or endogenous) profitability contributors such as net interest margin (NIM), loan loss reserves, ratio of non-performing loans to gross loans, and external (or exogenous) macroeconomic variables, such as the 30-year average mortgage rate, Gross Domestic Product (GDP) economic growth rate, unemployment rate, interest rate, inflation rate and openness (i.e., exports + imports/GDP) by using the Generalized Method of Moments (GMM) estimator technique. The results reveal that bank-specific variables, including net interest margin, loan loss reserves and non-performing loans, have a significant impact on bank profitability in the United States. Similarly, the results show that macroeconomic variables, namely the average mortgage rate, economic growth, and unemployment rate, exert significant effects on the U.S. banks’ profitability. The results further indicate that changes in openness are detrimental to bank profitability. The implications are discussed.

scholarly journals Degree of financialization and energy efficiency in Sub-Saharan Africa: do institutions matter?

2020 ◽  
Vol 6 (1) ◽  
Author(s):  
Philip Kofi Adom ◽  
Franklin Amuakwa-Mensah ◽  
Salome Amuakwa-Mensah
Keyword(s):  
Economic Growth ◽  
Energy Efficiency ◽  
Banking Sector ◽  
Developing Economies ◽  
Generalized Method Of Moments ◽  
Energy Utilization ◽  
Sub Saharan Africa ◽  
Political Regimes ◽  
Growth Strategies ◽  
Bank Profitability

Abstract The United Nations Sustainable Development Goal 7 emphasizes the need for economies around the world to double their efforts in energy efficiency improvements. This is because improvements in energy efficiency can trigger economic growth and considered as one of the ‘green’ growth strategies due to its carbon free content. To this end, some empirical studies have investigated the nexus between economic growth and energy efficiency, but the effects of the latter on financial indicators have not been sufficiently studied in the literature, at least in developing economies like Africa. This study examines the effect of energy efficiency improvements on commercial bank profitability under different political regimes (i.e., autocratic and democratic political regimes); something previous literature had neglected. The study uses panel data, consisting of 43 African countries and the simultaneous System Generalized Method of Moments. We found that energy efficiency improvement is more likely to induce higher bank profitability in political institutions with the characteristics of centralization of power compared with those with decentralization of power. Furthermore, for the banking sector, the findings suggest that energy utilization behavior of clients should be included in the loan or credit valuation process. For the government, the agenda of energy efficiency should be aggressively pursued while taking cognizance of creating a political environment that weans itself from a ‘grandfathering’ behavior.

scholarly journals Corporate Governance, Political Connections, and Bank Performance

2019 ◽  
Vol 7 (4) ◽  
pp. 62 ◽  
Author(s):  
Haris ◽  
Yao ◽  
Tariq ◽  
Javaid ◽  
Ain
Keyword(s):  
Corporate Governance ◽  
Profit Margin ◽  
Political Connections ◽  
Return On Assets ◽  
Board Size ◽  
Bank Profitability ◽  
Return On Equity ◽  
Net Interest Margin ◽  
The Impact ◽  
Interest Margin

This study investigates the impact of corporate governance characteristics and political connections of directors on the profitability of banks in Pakistan. The study uses the data of 26 domestic banks over the latest and large period of 2007–2016. Our findings firstly affirm that bank profitability is negatively affected by the presence of politically connected directors on the board, reporting significantly lower return on assets, return on equity, net interest margin, and profit margin. Secondly, our findings also affirm the negative political influence on the sustainability of the banking industry, reporting significantly lower return on assets, return on equity, net interest margin, and profit margin during the government transition of banks having politically connected directors sitting on their board. Our findings further report an inverted U-shaped relationship between board size and bank profitability, suggesting that a board size beyond 8–9 members decreases the profitability. The study further finds a positive impact of board composition, board independence, and director compensation on bank profitability, while also finding a negative impact of frequent board meetings, presence of foreign directors, and audit committee independence.

scholarly journals PENGARUH VARIABEL MAKROEKONOMI TERHADAP PROFITABILITAS BANK KONVENSIONAL BUKU 4 DI INDONESIA

2021 ◽  
Vol 3 (1) ◽  
pp. 65
Author(s):  
Sandi Fitra Yusuf ◽  
Mike Triani
Keyword(s):  
Economic Growth ◽  
Interest Rate ◽  
Random Effect ◽  
Random Effect Model ◽  
Bank Profitability ◽  
Macroeconomic Variables ◽  
Section Data ◽  
Insignificant Effect ◽  
Effect Model ◽  
Selection Test

This study explains the extent of the influence of macroeconomic variables on the profitability of BUKU 4 banks in Indonesia. The macroeconomic variables consist of economic growth (X1), inflation (X2), Bank Indonesia Interest Rate (BI Rate) (X3, and Profitability is measured by the ROA (Return) ratio. On Asset). This study combines cross section data of 7 banks with time series from 2010-2019, with the Panel Regression method with the Random Effect model selection test. The results show that: (1) Economic growth has a positive and significant effect on bank profitability. conventional BUKU 4 in Indonesia, (2) Inflation has a positive and insignificant effect on the profitability of conventional BUKU 4 banks in Indonesia, (3) the Bank Indonesia Interest Rate (BI Rate) has a positive and insignificant effect on the profitability of conventional BUKU 4 banks in Indonesia.

scholarly journals Determinants of Profitability in the Banking Sector: An Analysis of Post-Soviet Countries

Economies ◽  
2018 ◽  
Vol 6 (3) ◽  
pp. 41 ◽  
Author(s):  
Serhat Yüksel ◽  
Shahriyar Mukhtarov ◽  
Elvin Mammadov ◽  
Mustafa Özsarı
Keyword(s):  
Economic Growth ◽  
Financial Performance ◽  
Credit Card ◽  
Fixed Effects ◽  
Banking Sector ◽  
Generalized Method Of Moments ◽  
Negative Relationship ◽  
Annual Data ◽  
Bank Profitability ◽  
Interest Income

The purpose of this paper is to identify the determinants of bank profitability in 13 post-Soviet countries. Within this scope, annual data between 1996 and 2016 is analyzed by using fixed effects panel regression and the Generalized Method of Moments (GMM). It is concluded that loan amount, non-interest income and economic growth are significant indicators of profitability. Moreover, the 2008 global mortgage crisis has a negative influence on bank profitability in post-Soviet countries. According to the estimation results, there is a positive relationship between non-interest income and economic growth with profitability. This result shows that when non-interest income of the banks increases, such as credit card fees and commission, it affects the financial performance of the banks, positively, and contributes to bank profitability. Another result of this study is that economic growth positively influences bank profitability. This result allows us to conclude that higher GDP comes with higher bank profitability for post-Soviet countries. Lastly, there is a negative relationship between loan-to-GDP ratio and profitability of the banks in post-Soviet countries. This means that when the ratio of total loans to GDP increases, it affects financial performance of the banks in a negative way. While considering this result, it is recommended that banks in post-Soviet countries should focus on ways to increase their non-interest income. Additionally, it is also significant for these banks to be careful and risk averse when lending to their customers.

scholarly journals An ARDL Approach on Crude Oil Price and Macroeconomic Variables

2019 ◽  
Vol 4 (1) ◽  
pp. 68-73
Author(s):  
Seuk Yen Phoong ◽  
Seuk Wai Phoong
Keyword(s):  
Economic Growth ◽  
Crude Oil ◽  
Unemployment Rate ◽  
Positive Relationship ◽  
Oil Prices ◽  
Oil Price ◽  
Crude Oil Price ◽  
Macroeconomic Variables ◽  
Crude Oil Prices ◽  
Ardl Approach

Objective - The removal of fuel subsidies by the Malaysian government in 2014 has been implement with the managed float system for fuel prices. Methodology/Technique - This study investigates the impact of the managed floating system of crude oil prices on the Malaysian economy using ARDL approach by looking at macroeconomic variables such as inflation, economic growth and unemployment rates. Findings - The results show that all of the variables have short lived relationship with oil prices whereby inflation and economic growth are positively related to oil prices. However, unemployment rate has a negative relationship with the changes of WTI crude oil prices. Novelty - The major input in the economy of Malaysia contributes to a positive relationship between inflation and oil prices, whilst the contribution of Malaysia being an oil-producing country results in the positive relationship of economic growth and oil price. Likewise, as oil prices are high, the increase in demand results in increase in job opportunities. Lastly, the correlation test shows that inflation and economic growth have a high positive correlation while unemployment rate has a low negative correlation with oil price. Type of Paper: Empirical. Keywords: ARDL; Crude Oil Price; GDP; Inflation; Unemployment. JEL Classification: E10, E30, E39. DOI: https://doi.org/10.35609/jber.2019.4.1(8)

scholarly journals Bank Profitability Determinants: Firm-Level Observations in the ASEAN-5 Markets

2021 ◽  
Vol 12 (3) ◽  
pp. 77
Author(s):  
Nur Diyana Athirah Binti Adnan ◽  
Wei-Theng Lau ◽  
Siong-Hook Law
Keyword(s):  
Banking Sector ◽  
Random Effect ◽  
Random Effect Model ◽  
Ordinary Least Squares ◽  
Capital Adequacy ◽  
Loan Loss ◽  
Bank Profitability ◽  
Macroeconomic Factors ◽  
Macroeconomic Variables ◽  
Effect Model

This paper aims to investigate the bank-specific characteristics and macroeconomic factors affecting the profitability performance of the Southeast Asian banking sector. The sample markets cover the five original members of ASEAN, i.e. Indonesia, Malaysia, Philippines, Singapore, and Thailand, whereas the sample period encompasses the years between 2010 and 2017. While a healthy financial system is important for the economic sustainability and growth, there are still limited studies to understand how banks generally perform in this region. Our findings largely support the existing hypotheses about the importance of certain micro- and macro variables while contributing new empirical evidence to the current literature. The bank size, loan to assets, loan loss provision, non-interest incomes and expenses, and capital adequacy remain relevant in influencing bank profitability in the ASEAN-5 region. Macroeconomic variables of inflation, interest rate, market concentration and GDP per capita play considerable roles in profitability when they are assessed separately from the bank-specific factors. It is worth noting that the bank-level factors remain important and outplay the macroeconomic factors when they are considered at the same time. The result robustness is of a certain level of satisfaction because comparisons have been performed across individual countries and across different regression models of pooled ordinary least squares model, random effect model, and fixed effect model for all the tentative tests. Both the return on assets and return on equity are examined. Combining both micro- and macroeconomic variables in the regressions also indicates an overall improvement in the r-squared under the same models.

scholarly journals Determinants Of Bank’s Profitability In EU15

2015 ◽  
Vol 62 (1) ◽  
pp. 93-101 ◽  
Author(s):  
Bogdan Căpraru ◽  
Iulian Ihnatov
Keyword(s):  
Credit Risk ◽  
Market Concentration ◽  
Negative Influence ◽  
Risk Indicators ◽  
Empirical Literature ◽  
Bank Profitability ◽  
Banking Systems ◽  
Net Interest Margin ◽  
The Impact ◽  
Interest Margin

Abstract In this paper we analyse determinants of bank profitability of EU15 banking systems for the period 2001-2011. We use as proxy for banks profitability the return on average assets (ROAA), the return on average equity (ROAE) and net interest margin (NIM). We also measure the impact of the first and the largest wave of enlargement (10 new members in 2004) on EU15 bank profitability, introducing a dummy variable. The contribution of this paper for the empirical literature is that there are no other studies that deal bank profitability for all EU 15 countries for the period considered (2001-2011). The literature splits the factors that influence banks’ profitability in two large groups: bank-specific (internal) factors and industry specific and macroeconomic (external) factors. Our results are in line with the economic theory. Cost to Income Ratio, credit risk and market concentration had a negative influence in case of all measures of banks’ profitability, while bank liquidity only for ROAE and NIM. The size of banks had a negative impact on NIM, suggesting that bigger the bank is, smaller the net interest margin ratio is, but, on the contrary, in case of ROAA, had a direct effect. The market concentration had a negative influence, meaning that the increasing competition, as a structural point of view, increases banks’ profitability. The results show us that the process of European Union enlargement from 2004 does not have significant impact on EU15 banking systems’ profitability. It has a week and negative effect only in case of net interest margin. As policy recommendations, we suggest for authorities a better supervision for credit risk and liquidity and maintaining a competitive banking environment. For banks’ management we also recommend to monitor the credit risk indicators, optimizing costs and diversifying the sources of income.

scholarly journals The Interaction of Profitability with Solvency: A Simple Model of a Bank

2009 ◽  
Vol 4 (2) ◽  
pp. 81-88
Author(s):  
Srđan Marinković
Keyword(s):  
Simple Model ◽  
Deterministic Model ◽  
Solvency Ii ◽  
Equity Capital ◽  
Bank Profitability ◽  
Low Level ◽  
Banking Regulations ◽  
Net Interest Margin ◽  
Solvency Ratio ◽  
Interest Margin

The Interaction of Profitability with Solvency: A Simple Model of a Bank This paper develops a simple deterministic model to analyze how the profitability of bank operations infuences the solvency of a banking firm. The results imply that the solvency ratio is directly related to the net interest margin (the "bread and butter" of bank profitability) and inversely related to the liquidity ratio. This model has several implications on the design of banking regulations: i) profitability has to be treated as "marginal" solvency, ii) a profitable bank can operate sustainably even with a low level of equity capital; iii) the supervisory framework has to be able to recognize any measure of earnings level, its trends, stability and quality; and finally iv) the frequency of audit trials has to be as high as possible.

scholarly journals The Impact of Capital on Bank Profitability: Case of Tunisia

2021 ◽  
pp. 7-20
Author(s):  
Mohamed Aymen Ben Moussa ◽  
Hédi Trabelsi ◽  
Adel Boubaker
Keyword(s):  
Capital Adequacy ◽  
Bank Capital ◽  
Return On Assets ◽  
Bank Profitability ◽  
Return On Equity ◽  
Net Interest Margin ◽  
Capital Adequacy Ratio ◽  
The Impact ◽  
The Relationship ◽  
Interest Margin

The capital adequacy ratio measures the ability of a financial institutions to meet its liabilities by comparing its capital with assets. This article studied the relationship between bank capital and bank profitability measured by (Return on assets; return on equity; net interest margin). We used a method of static panel for a sample of 11 banks in Tunisia between (2000…2018). We found that bank capital has a significant impact on ROA. But capital has a non significant effect on bank return on equity and not significant impact on bank net interest margin.

Sign in / Sign up

Export Citation Format

Share Document