Determinants of Profitability on the Case of Selected Private Commercial Banks in Ethiopia
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Date
2023-06-03
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A.A.U.
Abstract
This research attempts to investigate the factors that affect the profitability of a sample of six private commercial banks in Ethiopia during 2010-2022. The study used measures of internal factors that affect bank profitability. Panel data regression analysis is applied to explore the Effect of capital adequacy, managerial capability, asset size, asset quality, earning capability and liquidity on profitability of the banks. The regression result suggested that internal factors Including the banks’ management capability, asset size and earning ability ratios positively and significantly contribute for the profitability of the sampled banks. The explanatory analysis result showed that with regard to management efficiency DB ranked first followed by AIB and NIB. In terms of bank size AIB, DB and BOA are ranked first, second and third respectively. The results of this study therefore, suggest that banks need to work on improving their operational efficiency through increasing productivity, cost minimization and revenue generation. In addition, banks need to focus in mobilizing relatively cheaper deposits by opening up of new branches to reach the unbaked population and they should also expand their banking service through, digital banking and agency banking services