Eeahhy and Folitable bankt can contribute immensely b the development ofrnfnancial seclor in particulor and the counlry's deltelopmenl in generul. The studyrnemployed autoregrcssi|e distributed lag (ARDL) to examine the relationship andrnbehavior of liquidity and pro/ilability of the commercial banking induslry inrnEthiopia. Quarterly consolidated lnancial statements lhat co|er the period 1998rnQ3- 2017 Q4 v'ere usedlor this stuiy. Augme ed Dickey Fuller (ADF) vasusedtorntest for unit rcot. In attempt to draw wlid conclusion, diagnostic rcss t4tere carriedrnout for serial correlation, heterosceddsticity, and normaliry. In order to check thernstability of long-fut1 coeffcients that form the eftor-correction lerm in combinalionrn'with short-run dynamics, cumulati,,te sum ofrecursive residuals test (CUSUM andrnthe cumulalive sum ofsquares ofrecursive residuals tesl (CUSUMQ) is applied tornfie residuals of the nodels. The estimation resuh of the error correction modelrnshovs that the speed of adjustment of liquidiry and prcrttability to long runrnequilibrium isfaster in the commercial banking industry o:fElhiopia. The results ofrnARDLestimalion shorrs that Funding Liquidity Risk, over allLiquidity Position (i.e.rnRatio of Liquid Assets to Total Deposit), Bank size measured as a Natural logarithmrnof lotal asset are key determinants oflhe Net l terest Margin bolh in lhe shorl ahdrnlong term.