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Determinants of Bank Profitability in UK on the Eve of the Brexit

In: The Changing Financial Landscape

Author

Listed:
  • Chris Grose

    (International Hellenic University)

  • Aglaia Kanella

    (International Hellenic University)

  • Theodoros Kargidis

    (International Hellenic University)

  • Mihaela Mocanu

    (Bucharest University of Economic Studies)

  • Τheodoros Spyridis

    (Independent Authority for Public Revenue)

Abstract

The paper analyses bank profitability in a sample of UK commercial banks during the period 2007–2018. The models measuring profitability include as dependent variables the Return on Average Assets (ROAA), Return on Average Equity (ROAE) and Net Interest Margin (NIM) while explanatory variables used include a set of internal (bank-specific) and external macroeconomic factors. The results indicate that bank profitability is not only affected by internal-/bank-specific factors, but also affected by macroeconomic indicators. While largely findings corroborate general pertinent literature findings, they provide and up-to-date outlook on bank profitability in the UK on the eve of the Brexit. The findings of the analysis indicate that the size of the banks has a negative role in the profitability due to the existence of economies of scale for the smaller banks and diseconomies for the larger. Additionally, as far as the external macroeconomic factors are concerned, the sign of GDP per capital growth varies and depends on the measurements of profitability. It can be assumed that the macroeconomic factors affects the profitability of the banking sector.

Suggested Citation

  • Chris Grose & Aglaia Kanella & Theodoros Kargidis & Mihaela Mocanu & Τheodoros Spyridis, 2021. "Determinants of Bank Profitability in UK on the Eve of the Brexit," Contributions to Economics, in: Goran Karanovic & Persefoni Polychronidou & Anastasios Karasavvoglou (ed.), The Changing Financial Landscape, pages 187-203, Springer.
    • Handle: RePEc:spr:conchp:978-3-030-82778-6_11
    DOI: 10.1007/978-3-030-82778-6_11
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