Determinants of profitability of private commercial banks in Ethiopia
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Date
2025-03-05
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A.A.U
Abstract
The study seeks to identify the determinants of performance of private banks by considering the
new NBE directive of Surrendering percentage of Foreign Exchange Inflow to the National Bank
of Ethiopia and other bank specific factors.. In order to realize the objective of the study, mixed
research design was used whereby descriptive, econometrics and qualitative approaches were
blended. Data were collected mainly from secondary data emerged from annual reports, of all
16 private banks using censes sampling method. For the analysis of data, descriptive statistics
and econometrics model (random effect panel regression) were used. Moreover, qualitative data
analysis was used to substantiate the arguments obtained through the quantitative analyses. The
findings of the study show that managerial efficiency and Net interest margin has found
statistically significant and positive relationship with banks’ profitability. On the other hand,
variables loan provision amount negative and statistically significant relationship with banks’
profitability. Therefore, considering the output of the research it is recommended that private
commercial banks should increase their managerial efficiency, net interest margin and lowering
their NPL position to minimize the provision amount held for each loan loss in order to be
profitable. Moreover, the government should revise its policy imposed on private banks and
further exploration on the long run impact of the requirement is recommended.