scholarly journals Analysis of Critical Determinants of Commercial Banks Profitability: Evidence from Nigeria

2021 ◽  
pp. 52-63
Author(s):  
Ibe Sunny Obilor ◽  
Egbujor Kelechi ◽  
Jude Nathaniel Osuagwu
Keyword(s):  
Commercial Bank ◽  
Commercial Banks ◽  
Positive Margin ◽  
Output Growth ◽  
Bank Profitability ◽  
Doing Business ◽  
Ex Post ◽  
State Of The Economy ◽  
Ex Post Facto ◽  
Asset Quality

This study investigated the critical determinants of commercial bank profitability in Nigeria. The objective was to develop empirical models for predicting commercial bank profitability. The study adopted a combination of ex-post facto and survey research design in data collection and analysis, while quantitative and qualitative tools were employed in data analysis. The CAMELS performance basket provided the framework that guided the investigation. Two industry drivers (bank size and market share) and one macroeconomic driver (cyclic output growth rate of the economy) were included into the CAMELS basket. The quantitative approach made use of descriptive statistics and set of econometric tools in the analysis. The result of econometric analysis identified assets quality, liquidity and earnings as the significant determinants of commercial bank profitability in Nigeria. The result of the qualitative analysis based on expert opinion equally identified asset quality, earnings and liquidity as three top determinants of commercial bank profitability. This also validates the result of quantitative analysis. The study concludes that irrespective of whatever is the industry and macroeconomic state of the economy, commercial banks’ ability to remain profitable, strictly dependent on the capacity of internal management to invest the banks resources into quality assets that affords the bank the opportunity to maintain optimal liquidity and generate earnings sufficient to offset all associated cost of doing business as well as create positive margin adequate to reward shareholders. Based on the above conclusion, the study recommends for increased capacity building (technical and managerial) of internal managers of commercial banks in Nigeria for enhanced strategic, tactical and operational planning and management of banks.

scholarly journals Internal Determinants of Commercial Bank Profitability In Indonesia

2017 ◽  
Vol 8 (3) ◽  
pp. 219-223 ◽  
Author(s):  
Umi Widyastuti ◽  
Purwana E.S. Dedi ◽  
Sri Zulaihati
Keyword(s):  
Credit Risk ◽  
Commercial Bank ◽  
Commercial Banks ◽  
Least Squares Method ◽  
Ordinary Least Squares ◽  
Capital Adequacy ◽  
Operating Efficiency ◽  
Bank Profitability ◽  
Operating Income ◽  
Net Interest Margin

Abstract Internal determinants of bank profitability can be defined as those factors that are influenced by the bank’s management decisions and policy objectives. This paper is aimed to examine the internal factors that impact on commercial banks profitability in Indonesia. The factors reviewed in the model namely capital adequacy, credit risk (non-performing loan), liquidity (loans to deposit ratio), net interest margin and operating efficiency (operating expenses to operating income ratio). Using purposive sampling method, the analysis used thirty three commercial banks, with 168 observations for the period 2010 to 2015. Based on the Chow-test, the common effect model was preferred. The model is estimated using Ordinary Least Squares method. The results revealed that two hypotheses were not be accepted. There are no significant effects of capital adequacy and credit risk on profitability, but the model explains that there are significant effects of all explanatory variables toward commercial bank profitability. However, other important internal determinants of bank profitability still have not included in the model of this paper.

scholarly journals PROFITABILITY OF COMMERCIAL BANKS OF RUSSIA: MODERN STATE AND DEVELOPMENT TRENDS

2018 ◽  
pp. 139-148 ◽  
Author(s):  
Elena Borisovna Starodubtseva ◽  
Olga Mikhailovna Markova
Keyword(s):  
Commercial Bank ◽  
Commercial Banks ◽  
Raw Materials ◽  
Performance Criteria ◽  
Financial Indicators ◽  
Bank Profitability ◽  
International Capital Markets ◽  
Financial Condition ◽  
Growth Increase ◽  
Internal And External Factors

Profitability indicators are included in the group of key financial indicators of a modern commercial bank, in particular, they act as one of the key performance criteria for a commercial bank, the use of assets and liabilities. The growth of profitability of a commercial bank contributes to the improvement of its financial condition; profitability is one of the components of the competitiveness of a commercial bank; profitability is important for business owners and investors. Improving profitability is a tool to increase the investment attractiveness of the bank, contributes to the growth of the market value of the shares. Increasing profitability is one of the main tasks of a modern commercial bank. There has been carried out the comparative analysis of profitability criteria of the largest commercial Russian banks: PJSC Sberbank, PJSC VTB, PJSC Gasprombank, JSC “Rosselkhozbank”, JSC “Alfa-bank”, etc. It has been stated that in recent years the profitability of commercial banks in Russia was rather unstable, but the most banks are profitable both in capital and in assets. Banks with state share 16.1% have the lead in capital profitability. The analysis of the two major indicators of profitability (assets and capital) showed their vulnerability to a range of internal and external factors. There have been determined the reasons of decreasing assets profitability of the commercial banks: problems of external funding; access to international capital markets in terms of sanctions against Russian banks; decrease of prices on oil and other raw materials. All this results in a slowdown of the state economics, inflation growth, increase of the proportion of non-performing loans and additional expenses on levies, etc. Proposals to improve profitability have been made.

scholarly journals Credit Risk Assessments and Firm Value of Listed Commercial Banks in Kenya

2021 ◽  
pp. 68-82
Author(s):  
Mohamed Maalim Issackow ◽  
Felix Mwambia ◽  
Wilson Muema
Keyword(s):  
Credit Risk ◽  
Commercial Bank ◽  
Commercial Banks ◽  
Firm Value ◽  
Equity Capital ◽  
Capital Adequacy ◽  
Risk Assessments ◽  
Asset Quality ◽  
The Impact ◽  
Positive Effect

Despite the various control measures put in place especially the CBK’s prudential laws to ensure that the performance of commercial banks in Kenya is ensured, most commercial banks have been collapsing in the recent past. It is in this light that the current study sought to ascertain the impact of bank liquidity, capital adequacy, asset quality and earnings on the firm value of listed Commercial banks in Kenya. Descriptive research design was employed on a population sample of eleven publicly listed retail banks. Secondary data was collected from CBK and other public financial reports over the 12-year period from 2009 to 2020. The collected data was analysed using1a multivariate panel regression1model to generate the relevant regression tests. The1study established that the capital adequacy has a marginal positive impact on the firm value while earning ability was found to have a statically insignificant positive effect on firm value among Kenyan commercial bank. The study findings indicated that liquidity was insignificantly and negatively correlated with firm value as asset quality had insignificant positive effect on firm value among Kenyan commercial bank. The study recommends that, managers of listed banks should embrace utilization of internally generated equity capital to ultimately promotes credit risk assessments as they maintain optimal levels of liquidity to maximize firm value and maintain high quality of assets as they sustained levels of earnings that boost output. This paper explained a credit risk rating concept that had not been examined in Kenya before.

scholarly journals Financial Information Influencing Commercial Banks Profitability

2016 ◽  
Vol 8 (6) ◽  
pp. 166 ◽  
Author(s):  
Dhiaa Shamki ◽  
Ibrahim Khalaf Alulis ◽  
Karima Sayari
Keyword(s):  
Commercial Bank ◽  
Commercial Banks ◽  
Regression Models ◽  
Positive Influence ◽  
Bank Capital ◽  
Bank Profitability ◽  
Bank Management ◽  
Ratio Size ◽  
Multiple Regression Models ◽  
Capital Ratios

<p>The paper investigates the influence of bank capital ratio, size and loans on the profitability of a commercial bank in Jordan. It also evaluates whether returns on Assets (ROA) or returns on equity (ROE) is the better indicator that reflects bank profitability. Two Multiple regression models are used to test the influence of capital ratio, size and loans of a commercial bank on its profitability indicators measured by ROA and ROE and to detect the superiority between the two indicators for 13 Jordanian commercial banks for the period 2005-2013. The results of the study showed that capital ratio, size and loans have insignificant influence on ROA, but not on ROE except bank size. Regarding ROE, significant negative and positive influence for capital ratio and loans respectively are concluded. Although the small number of commercial banks in Jordan and some variables have not been well researched in literature, the paper presents a sight to associate bank performance/profitability proxied by ROA and ROE with its capital ratios, size and loans. Our results might assist bank management to capitalize the factors that could improve banks performance and hedge against the adverse factors.</p>

scholarly journals Determinants of Commercial Banks’ Profitability. Evidence from Hungary

2018 ◽  
Vol 66 (5) ◽  
pp. 1325-1335
Author(s):  
Isah Serwadda
Keyword(s):  
Commercial Banks ◽  
Regression Models ◽  
Capital Adequacy ◽  
Panel Regression ◽  
Internal Factors ◽  
Bank Profitability ◽  
Net Interest Margin ◽  
Capital Adequacy Ratio ◽  
Asset Quality ◽  
Panel Regression Models

This paper aims to find out whether bank‑specific (internal) factors impact on the profitability of commercial banks in Hungary for 16 a year period ranging from 2000–2015. The study employs a sample of twenty‑six commercial banks with four hundred sixteen observations. The study employs return on average assets (ROAA) as a proxy for bank profitability, and it also considers bank‑specific (internal) factors as independent variables. These include asset quality (non‑performing loans), overhead costs, bank size, net interest margin, and liquidity risk plus capital adequacy ratio. The study uses panel regressions, descriptive statistics and correlation analysis for the investigations. The panel regression models are to estimate the impact of bank‑specific (internal) factors on bank profitability. The Hausman specification test was conducted on the panel regression models in order to identify the best and appropriate model for the study. The empirical findings reveal that non‑performing loans, overhead costs and liquidity had a significant negative impact on bank profitability as bank size had a significant positive impact on profitability. However, net interest margin and capital adequacy ratio had no impact on bank profitability. The study concludes that bank size and asset quality are bank‑specific factors that have the biggest impact on commercial banks’ profitability in Hungary for the period under investigation. The study recommends that commercial banks should endeavor to manage and reduce overhead costs to be able to earn more profits since overhead costs adversely affect bank profitability. More so, commercial banks’ managers should regularly monitor credit and liquidity risk indicators as well as pursuing diversification policies of income sources while upholding optimisation of operational costs.

scholarly journals Does Covid-19 Have an Impact on Bank Performance in Indonesia? A Comparative Analysis Based on BUKU

2021 ◽  
Vol 2 (2) ◽  
pp. 9-18
Author(s):  
Novita Indri Yanti ◽  
Agrianti Komalasari ◽  
Tri Joko Prasetyo
Keyword(s):  
Comparative Analysis ◽  
Commercial Bank ◽  
Commercial Banks ◽  
Secondary Data ◽  
Financial Statements ◽  
Bank Performance ◽  
Capital Asset ◽  
Major Focus ◽  
Management Efficiency ◽  
Asset Quality

This study aims to determine whether there are differences in the financial performance of commercial banks in Indonesia before and during the Covid-19 pandemic, with a major focus on capital, asset quality, profitability, and management efficiency based on BUKU (Bank Umum Kegiatan Usaha - Commercial Bank Business Activities). The data used in this study is secondary data, which consists of the 2015-2019 financial statements and the 1st quarter 2020 - the 3rd quarter 2020 financial statements. The sample used in this study amounted to 38 banks. The analytical method used is the Kruskal-Wallis test using the IBM SPSS version 25 software. The results of data processing and data analysis using the Kruskal-Wallis test show that there are differences in the capital (CAR), asset quality (NPL), profitability (ROA), and management efficiency (BOPO) of banking companies between BUKU 2, BUKU 3, and BUKU 4 before and during the covid-19 pandemic. The results of this study indicate that in general, the Covid-19 pandemic has an impact on the performance of commercial banks in Indonesia.

Determinants of bank profitability in Tunisia: does corruption matter?

2017 ◽  
Vol 20 (1) ◽  
pp. 70-78 ◽  
Author(s):  
Khemaies Bougatef
Keyword(s):  
Method Of Moments ◽  
Commercial Banks ◽  
Design Methodology ◽  
Generalized Method Of Moments ◽  
Surprising Result ◽  
Bank Profitability ◽  
Content Type ◽  
Method Of Moments Estimator ◽  
Asset Quality ◽  
High Level

Purpose In this paper, the author aims to examine the effect of perceived level of corruption on bank profitability. Design/methodology/approach The analysis is based on a balanced panel of ten commercial banks in Tunisia over the period 2003-2014. The author uses the generalized method of moments estimator technique described by Arellano and Bover (1995). Findings The author finds a positive relationship between the bank profitability and the corruption level. This surprising result suggests that Tunisian commercial banks take advantage from the high level of corruption. Regarding the others determinants, the findings reveal that bank profitability is positively related to capitalization level and liquidity. By contrast, a low asset quality is associated with low profitability. Originality/value The novelty of this study consists in the inclusion of the corruption level as a determinant of bank profitability.

scholarly journals Agency Cost and Credit Risk Management: Empirical Evidence from Listed Commercial Banks in Nigeria

2020 ◽  
pp. 1-17
Author(s):  
Peter E. Ayunku ◽  
Akwarandu Uzochukwu
Keyword(s):  
Credit Risk ◽  
Commercial Banks ◽  
Random Effect ◽  
Agency Cost ◽  
Data Set ◽  
Nonperforming Loans ◽  
Ex Post ◽  
Effect Regression ◽  
Ex Post Facto ◽  
New Policies

This study explores the relationship between agency cost and credit risk of quoted commercial banks in Nigeria. Five hypotheses were formulated following the dependent variable of credit risk which we proxy as non-performing loan. The independent variables employed for this study include agency cost, profitability, income diversification, corporate governance and firm leverage. This study is based on ex-post facto research design and made use of panel data set collected from twelve (12) quoted commercial banks within thirteen years of 2007 and 2019 financial year.  We analyzed the data set using a random effect regression analysis. The result showed that agency cost which is measured as managerial inefficiency is strongly and positively related to the non-performing loan of commercial banks in Nigeria during the period under investigation. However, in light of the obtained result, we recommend that bank managers in Nigeria should take a keen look at the activities that make up agency cost. Hence, they should consider new policies that will lower the size of its agency cost to reduce the level of nonperforming loans which will ultimately create room for greater profit.

scholarly journals PENGARUH PEMBIAYAAN, NON PERFORMING FINANCING (NPF), CAPITAL ADEQUACY RATIO (CAR), DAN FINANCING TO DEPOSIT RATIO (FDR) TERHADAP PROFITABILITAS BANK SYARIAH

2020 ◽  
Vol 7 (2) ◽  
Author(s):  
Uswatun Hasanah ◽  
Anwar Made ◽  
Ati Retna Sari
Keyword(s):  
Commercial Bank ◽  
Commercial Banks ◽  
Hypothesis Test ◽  
Linear Regression Analysis ◽  
Multiple Linear Regression Analysis ◽  
Capital Adequacy ◽  
Bank Profitability ◽  
Capital Adequacy Ratio ◽  
Quantitative Descriptive ◽  
Descriptive Method

The purpose of this study was to examine and determine the effect of Financing, Non-Performing Financing (NPF), Capital Adequacy Ratio (CAR) and Financing to Deposit Ratio (FDR) on the Profitability of Islamic Banks in Indonesia in 2013-2017. The population of this research is Sharia Commercial Bank in Indonesia. Sampling uses the time series cross section method. The population is 11 Sharia Commercial Banks. Methods of observation for 5 years (2013-2017). Analysis of the data used in research is the classic assumption test and hypothesis test. The method used in this research is quantitative descriptive method, and the analytical method used is multiple linear regression analysis. The results of the study show that the Non Performing Financing (NPF) and Capital Adeaucy Ratio (CAR) variables affect the profitability of Islamic Commercial Banks both partially and simultaneously whereas for Financing and Financing to Deposit Ratio (FDR) variables do not partially affect the Sharia Commercial Bank Profitability.

scholarly journals Commercial Bank Loans and the Performance of Small and Medium Scale Enterprises (SMEs) In Nigeria

2021 ◽  
Vol 6 (6) ◽  
pp. 46-59
Author(s):  
Kanu Success Ikechi ◽  
Nwadiubu Anthony
Keyword(s):  
Commercial Bank ◽  
Commercial Banks ◽  
Bank Loans ◽  
Financial Assistance ◽  
Least Square ◽  
Series Data ◽  
Industrial Transformation ◽  
Medium Scale ◽  
Ex Post ◽  
The Impact

The contributions of Small and Medium Scale Enterprises (SMEs) to the growth of Nigerian economy cannot be understated as they seem to drive the economic and industrial transformation of the country. Notwithstanding the acknowledged role of SMEs, a number of factors tend to limit their growth potentials. They’re still faced with the issue of funding and to overcome this problem, external borrowing has become inevitable. Commercial banks appear to be the most likely source of funds. Thus, the main objective of this study is to ascertain the impact of commercial bank loans on the performance of small and medium scale enterprises in Nigeria. While an ex-post facto research design was adopted in the investigation; a least square regression analysis was carried out on a time-series data to ascertain relationships, and to avert the emergence of spurious results, unit root tests were conducted. Outcome of the study indicates that, there exists an inverse relationship (though not statistically significant) between the amount of commercial bank loans (CBLSME) made available to SMEs and the output of SMEs (OPSME) in Nigeria This implies that as CBLSME increases, OPSME decreases. The negative sign exhibited by OPSME is not in line with our apriori expectation because an increase in CBLSME is supposed to cause an increase in investment which is expected to boost the output of SMEs. This trend has shown the poor attitude of commercial banks towards the granting of loans to SMEs in Nigeria. The study also revealed that a seeming upsurge in the activities of SMEs may not have reduced the rate of unemployment in Nigeria as a good number of people employed by the SMEs are probably under-employed. Conclusively, the inability of our commercial banks to grant effective loans to SMEs have translated to low level of output of SMEs to GDP. This in turn has impacted negatively on average capacity utilization and a consequent hike in the already strained unemployment situation in Nigeria. While commercial banks are expected to come to the rescue of SMEs, the truth must be said, that these institutions are profit oriented and may not be in a vantage position to give long term loans with depositors funds that are predominantly short tenured. Based on the findings of study, it is recommended that, the intervention programs put in place by the Small and Medium Enterprises Development Agency of Nigeria (SMEDAN) to ameliorate the challenges of the SMEs should be strengthened. It is not out of place too, for commercial banks to re-jig their SME desks in order to offer sustainable financial assistance to the SMEs. Lastly, the Bank of Industry (BOI) should be properly positioned in its mandate of providing financial assistance for the establishment of large, medium and small projects as well as the expansion, diversification and modernization of existing enterprises and to rehabilitate the ailing ones.

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