Determinants of commercial banks' performance in Mozambique

This paper analyses the determinants of banking sector performance in Mozambique over the period 2008 to 2016. For this purpose, 11 determinants were considered, classified into bank specific, banking-industry specific and macroeconomic specific factors, whose hypotheses were tested using the multiple linear regression model, for a sample of eight commercial banks. We find that banks' return on assets was positively influenced by capital adequacy, diversification, and inflation, while liquidity risk and banking efficiency had a negative effect. Regarding return on equity, the explanatory variables with a positive effect were asset quality and level of bank concentration, while the degree of diversification of the bank's activity had a negative effect. Moreover, the variables size, bank deposits, the country's economic growth rate and the central bank's key interest rate had no significant relevance in explaining bank performance in Mozambique.