EFFECT OF BANK-CHARACTERISTIC AND MACRO-ECONOMIC FACTORS ON LISTED COMMERCIAL BANKS’ PROFITABILITY IN SUB-SAHARAN AFRICA

This study investigated Bank-characteristic and Macro-Economic factors affecting commercial banks’ profitability in Sub Saharan Africa for the period of 2008-2017 using panel data of 56 listed banks drawn from the Sub-Region. Secondary data ex-tracted from the listed Commercial Banks' financial statements were analyzed. The explanatory variables were represented by Credit Risk, Liquidity Risk, Leverage Ratio and Exchange Rate while profitability was represented by Return on Assets (ROA). The study explored a correlational research design to examine the effect of Bank-characteristic and Macro-Economic factors on commercial banks’ profitability. VCE Robust Regressions were employed for the combined banks and country-specific banks’ analysis based on the Hausman Test Specification (fixed and random effects model). Although the Hausman specification test suggested that a fixed effect model is appropriate for the integrated banks’ data analysis, the study used VCE Robust Re-gression to underpin the outcome of the Hausman specification. The study found that Bank-characteristic and macro-economic factors had significantly affected the com-mercial banks' profitability over the study period for the aggregate model of all the banks while only internal factors mainly influenced banks’ profitability for the coun-try-specific banks’ profitability. The Credit Risk had a positive and significant rela-tionship with banks’ profitability while Exchange Rate had a negative and significant relationship with bank profitability during the study period. In controlling foreign exchange rate volatility, Sub-Sahara Africa Clearing Union (SACU) is recommended for Central Banks of member countries to enable them to settle payments for transac-tions within the Sub-region on the basis of multilateral pacts. This will, in turn, reduce the negative effect of an exchange rate increase in the sub-region and subsequently enhance banks’ profitability.