Factors Affecting Banks Profitability An Empirical Study On Ethiopian Private Commercial Banks

This study examined factors affecting profitability of private commercial banks’ inrnEthiopia. The study adopted quantitative research approach and the statistical costrnaccounting model was used to estimate the profitability, which was measured by returnrnon asset as a function of balance sheet, industry specific and macroeconomic explanatoryrnvariables. The finding of the study show that loan and advance, current deposit, otherrnliabilities and gross domestic product have statistically significant and positivernrelationship with banks’ profitability. On the other hand, variables like fixed deposit,rnmarket concentration have a negative and statistically significant relationship withrnbanks’ profitability. However, the relationship of deposit with other banks, sum ofrninvestment, saving deposit and inflation is found to be statistically insignificant. As arnresult, the study recommended that private commercial banks should focus on increasingrnpublic awareness to mobilize more savings this will enhance their performance inrnprovision of loans and advance to customers. Finally, private commercial banks shouldrnnot only be concerned about internal structures and policies, but they must consider bothrnthe internal environment and the macroeconomic environment together in fashioning outrnstrategies to improve their profitability.rnKey words: Asset Liability Management, Statistical Cost Accounting Model, Profitability

Get Full Work

Report copyright infringement or plagiarism