Yared AsratNatnael Mengistu2026-03-092026-03-092026-01-03https://etd.aau.edu.et/handle/123456789/7925This study investigates the determinants of profitability for large and medium-sized commercial banks in Ethiopia from 2020 to 2024, a period marked by significant economic shocks, political instability, and regulatory reforms such as the Home-Grown Economic Reform program. Using a quantitative panel data design and EGLS estimation, the research evaluates the impact of six bank-specific variables Financial Leverage (FL), Asset Quality (AQ), Operating Expense Ratio (OER), Loans to Deposits Ratio (LDR), Net Interest Margin (NIM), and Asset Growth (AG)—on Return on Assets (ROA). The findings reveal that Asset Quality (measured by NPL ratio), Operating Expense Ratio, and Financial Leverage have significant negative effects on profitability, alignng with the Risk-Return Trade-off Theory and the Efficiency Structure Hypothesis. Conversely, Net Interest Margin and Asset Growth demonstrate a positive relationship with ROA, while the Loans to Deposits Ratio shows no significant correlation due to restrictive regulatory caps on credit disbursement during the study period. Ultimately, the study concludes that operational efficiency and rigorous credit risk management are the primary drivers of sustainable performance for Ethiopian banks in volatile environments, providing critical insights for bank management and policymakers. Key Words: Bank Profitability, Return on Assets (ROA), Ethiopian Banking Sector, Net Interest Margin (NIM), Operating Expense Ratio (OER), Asset Quality (NPL), Financial Leverage, Regulatory Reform, Panel Data AnalysisenThesis