Determinants of Commercial Bank Performance: A Case Study in Selected East African Countries
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Date
2024-06-24
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A.A.U
Abstract
The main objective of commercial banks is profit maximization because commercial banks are
Business institutions established for generating profit. Hence, this study examines determinants
of commercial banks performance case study in selected east African commercial banks. The
data covered the period from 2018-2022 G.C. for the sample of selected fifty commercial banks.
Quantitative research approach and explanatory research design were adopted in carrying out
this research. Secondary data were collected from the selected fifty commercial banks using a
purposive sampling technique and macro- economic data were collected from NBE and World
Bank report while internal factor data were collected from audited financial statements. The
study used both descriptive and inferential statistics. Mean and standard deviation were used as
descriptive statistics, whereas correlation and panel regressions were used from inferential
statistics using stata. The results of the regression analysis demonstrate that, while liquidity and
bank size have considerable negative effects on NIM, inflation, the loan to deposit ratio, and
income diversification have significant positive effects. This study suggests that banks can
enhance their stability and performance by implementing several key strategies. Enhancing the
loan-to-deposit ratio can improve asset utilization and profitability. Promoting income
diversification allows banks to mitigate risks associated with reliance on a single income source.
Prudent liquidity management ensures banks can meet short-term obligations without
compromising financial health. Optimizing bank size can lead to economies of scale and better
resource allocation. Monitoring inflation trends helps in adjusting interest rates and maintaining
purchasing power. Lastly, policy support for economic stability, such as regulatory measures
and fiscal policies, creates a conducive environment for sustainable banking operations.