Determinants of Commercial Banks Profitability in Bangladesh

Abstract

The purposes of this paper are to examine the Determinants of Commercial Banks Profitability in Bangladesh based on panel data of 24 listed banks over the period 2019 to 2023. The used variables are ROA and ROE profitability, The explanatory variable used is the internal Dianara included bank size, capital adequacy, NPL (Non-Performing Loan), and external factors are economic growth. To estimate the associations, panel regression techniques (fixed and random effects models) were employed. Regression coefficient confirmed that ROE is the most powerful and leading factor of profitability. On the other hand, external macroeconomic factors like gross domestic product associated limited or no significant effect.

These findings imply that operational and financial characteristics of banks are more explanatory of the banks’ profitability than economic descriptors. Commercial banks need to focus on the above situation, and they could enhance equity management, operation efficiency, and present credit risk by referring the result of the study. There is a fine line for policymakers to tread between a regulatory framework that fosters internal performance improvement and a watching brief on macroeconomic stability. Profitability of strategic banking: A financial and risk management perspective of banks in Bangladesh