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Analysis of Long-term Determinants of the Profitability for Amalgamated Bank of South Africa

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  • Albert Antwi

    (Department of Mathematical Sciences, Sol Plaatje University, South Africa)

Abstract

Averting the risk of falling short on the expected profitability of a bank requires the knowledge of the underlying determinants. Knowledge of long-run underlying determinants of profitability assists banks in comprehensive planning. In this backdrop, the paper seeks to identify the long-term fundamental risk factors and their impacts on their profitability. The FM-OLS regression method is employed using annual data on the components of profitability as well as internal and external determinants of profitability of Amalgamated Bank of South Africa (ABSA) bank from 1998 to 2014. The study is particularly importance since bank-specific studies aimed at identifying long-run fundamental factors of profitability has not been given much attention in literature. Evidence from the study indicates that profitability of ABSA is cointegrated with its determinants. It is further observed that, with the exception of inflation and GDP, all the determinants have significant long-term impact on profitability. However, although size has significant impact on net interest margins, its impact on return on equity is insignificant. The results further suggest that capital and stock market capitalization pose risk to aggregate profitability of ABSA. It is therefore recommended that in future, ABSA should resort to optimal equity financing to maximize its expected profitability.

Suggested Citation

  • Albert Antwi, 2021. "Analysis of Long-term Determinants of the Profitability for Amalgamated Bank of South Africa," International Journal of Finance & Banking Studies, Center for the Strategic Studies in Business and Finance, vol. 10(3), pages 01-11, July.
    • Handle: RePEc:rbs:ijfbss:v:10:y:2021:i:3:p:01-11
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    References listed on IDEAS

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    5. Ahmad Aref Almazari, 2014. "Impact of Internal Factors on Bank Profitability: Comparative Study between Saudi Arabia and Jordan," Journal of Applied Finance & Banking, SCIENPRESS Ltd, vol. 4(1), pages 1-7.
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    Cited by:

    1. Suripto, 2021. "Governance Implementation on Financial Performance," International Journal of Finance & Banking Studies, Center for the Strategic Studies in Business and Finance, vol. 10(3), pages 115-123, July.

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