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The Impact Of The Covid-19 Pandemic On The Banks’ Profitability In The Romanian Banking Sector

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  • IOANA GEORGIANA FÄ‚RCAȘ

    (BabeÈ™-Bolyai University, Cluj-Napoca, Romania)

  • CODRUÈšA-MARIA FÄ‚T

    (BabeÈ™-Bolyai University, Cluj-Napoca, Romania)

Abstract

Covid-19 pandemic has a huge impact on all of the sectors, especially on the banking activity due to reduced demand for different types of loans. Therefore, we aim to investigate whether COVID-19 pandemic influences the banks’ performance measured though two indicators, Return on Assets (ROA) and Return on Equity (ROE). We analyse Romanian banking sector, spanning from 2007-2022. The main findings show that the pandemic influences negatively the banks’ profitability, but the economic environment plays also an important role in determining ROA and ROE. We bring new insights regarding the effects of macroeconomic indicators such as GDP Growth, Unemployment, Inflation and Volatility of RON/EUR on banks’ performance. Further, we analyse the determinants of ROA’s and ROE’s volatility. Our results bring evidence that main driver of standard deviation of ROA and standard deviation of ROE are External Debt Growth and Domestic Liabilities Growth.

Suggested Citation

  • Ioana Georgiana Fä‚Rcaè˜ & Codruèša-Maria Fä‚T, 2023. "The Impact Of The Covid-19 Pandemic On The Banks’ Profitability In The Romanian Banking Sector," Review of Economic and Business Studies, Alexandru Ioan Cuza University, Faculty of Economics and Business Administration, issue 31, pages 127-140, June.
    • Handle: RePEc:aic:revebs:y:2023:j:31:farcasi
    DOI: 10.47743/rebs-2023-1-0007
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    References listed on IDEAS

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    4. Li, Xingjian & Feng, Hongrui & Zhao, Sebastian & Carter, David A., 2021. "The effect of revenue diversification on bank profitability and risk during the COVID-19 pandemic," Finance Research Letters, Elsevier, vol. 43(C).
    5. Tu DQ. Le & Thanh Ngo, 2020. "The determinants of bank profitability : A cross-country analysis," Central Bank Review, Research and Monetary Policy Department, Central Bank of the Republic of Turkey, vol. 20(2), pages 65-73.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    banks’ profitability; banking market; emerging markets; covid;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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