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Determinants of Profitability of Commercial Banks in Bangladesh

Author

Listed:
  • Rokibul Hasan Sakib

    (Post graduate student, Department of Accounting & information Systems, University of Dhaka, Dhaka-1000, Bangladesh)

  • Dewan Azmal Hossain

    (Department of Accounting & Information Systems, University of Dhaka, Dhaka-1000, Bangladesh)

Abstract

This report focuses on the determinants of profitability of 30 DSE listed Commercial banks of Bangladesh from 2010 to 2017. The analysis part of this paper includes multiple regressions to determine impact of significant variables on profitability. The findings of this paper suggests that the net interest margin ratio (NIM), Asset size (LOGA), the ratio of operating expense (OPEX) are significant against the dependent variable called Return on Equity (ROE). Interest income is main source of income for banks. The finding suggests that if asset size increases, return on equity (ROE) will decrease and if operating expense ratio increases, return on equity decreases. Additional analysis is done in return on assets (ROA) and return on operating assets (ROOA) to justify whether the results meet with the main analysis. The findings of this study suggest that commercial banks should be more careful while giving loans with diversified portfolio maintenance.

Suggested Citation

  • Rokibul Hasan Sakib & Dewan Azmal Hossain, 2020. "Determinants of Profitability of Commercial Banks in Bangladesh," International Journal of Science and Business, IJSAB International, vol. 4(9), pages 1-16.
    • Handle: RePEc:aif:journl:v:4:y:2020:i:9:p:1-16
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    References listed on IDEAS

    as
    1. Hong Liu & John Wilson, 2010. "The profitability of banks in Japan," Applied Financial Economics, Taylor & Francis Journals, vol. 20(24), pages 1851-1866.
    2. Ms. Naomi N Griffin, 2015. "Determinants of Firm Profitability in Colombia’s Manufacturing Sector: Exchange Rate or Structural?," IMF Working Papers 2015/097, International Monetary Fund.
    3. Serhat Yüksel & Shahriyar Mukhtarov & Elvin Mammadov & Mustafa Özsarı, 2018. "Determinants of Profitability in the Banking Sector: An Analysis of Post-Soviet Countries," Economies, MDPI, vol. 6(3), pages 1-15, July.
    4. Franz R. Hahn, 2005. "Determinants of Bank Profitability in Austria. A Micro-Macro Approach," WIFO Studies, WIFO, number 25688.
    5. Valentina Flamini & Miss Liliana B Schumacher & Mr. Calvin A McDonald, 2009. "The Determinants of Commercial Bank Profitability in Sub-Saharan Africa," IMF Working Papers 2009/015, International Monetary Fund.
    6. Dewan Azmal Hossain, 2020. "Revisiting Sustainability Disclosure in Annual Reports and Websites: An Empirical Examination from the Banking Industry of Bangladesh," International Journal of Science and Business, IJSAB International, vol. 4(8), pages 76-91.
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    Cited by:

    1. Aslam Mahmud, 2020. "Bank-specific and Macroeconomic Determinants of Profitability: Evidence from Conventional Private Commercial Banks Listed on Dhaka Stock Exchange," International Journal of Science and Business, IJSAB International, vol. 4(10), pages 99-107.

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