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The Use of ROA and ROE in Study of a Bank’s Profitability

Author

Listed:
  • Irena Munteanu

    (“Ovidius†University of Constanta)

  • Constantina Alina Ilie

    (“Ovidius†University of Constanta)

Abstract

Bank profitability has been and will continue to be a topic of interest for all the actors in corporate banking governance. During this period, the banking sector is facing the double challenge of sustaining credit flow in the new macroeconomic conditions characterized by a high degree of uncertainty and managing rising financial risks. Shareholders are preoccupied with the return on investment, the management with result commitments, the monetary authority with ensuring stability in the banking sector. This paper presents an analysis of bank profitability applied to a commercial bank in Romania. We will carry out the calculation and interpretation of the indicators and the positioning of the bank in relation to the system. The analyzed bank is situated above the sector’s average. According to the obtained results, the Romanian banking sector has been standing at the highest level in terms of profitability according to the EBA (European Banking Authority) classification, in terms of ROE. Being a classic model of analysis, the study can be developed, applied to and adapted for other banking institutions. We believe that this paper is useful for young researchers and analysts.

Suggested Citation

  • Irena Munteanu & Constantina Alina Ilie, 2021. "The Use of ROA and ROE in Study of a Bank’s Profitability," Ovidius University Annals, Economic Sciences Series, Ovidius University of Constantza, Faculty of Economic Sciences, vol. 0(2), pages 1078-1083, December.
    • Handle: RePEc:ovi:oviste:v:xxi:y:2021:i:2:p:1078-1083
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    More about this item

    Keywords

    ROA; ROE; bank profitability;
    All these keywords.

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General

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