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Exploring the Determinant Factors of Bank‘s Net Earnings

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  • Okoli Margaret Nnenna

    (Management Technology, Federal University Of Technology, Owerri, Imo State, Nigeria)

Abstract

The paper examines the determinants of bank net earnings defined as profit after tax and deductibles in selected banks in Nigeria. Data used were extracted from balance sheets and income statement accounts and analyzed with the Ordinary Least square regression model. The results confirmed that customer’s deposits and reserves all impacted positively on the net earnings but only one bank’s customers deposit was statistically significant. Also the reserves of two banks were significant. Other variables like loan and advances was negatively related to net earnings contrary to a prior expectation but one bank’s loan and advances was statistically significant. Lastly, bad and doubtful debt has the negative expected sign with two banks being statistically significant. Overall the fit of the model was good. It was therefore recommended that banks should be prudent in advancing loans to their customers.

Suggested Citation

  • Okoli Margaret Nnenna, 2012. "Exploring the Determinant Factors of Bank‘s Net Earnings," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 2(2), pages 330-336, June.
  • Handle: RePEc:asi:aeafrj:2012:p:330-336
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    References listed on IDEAS

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    1. Stiroh, Kevin J. & Rumble, Adrienne, 2006. "The dark side of diversification: The case of US financial holding companies," Journal of Banking & Finance, Elsevier, vol. 30(8), pages 2131-2161, August.
    2. Demirguc, Asli & Huizinga, Harry, 1999. "Determinants of Commercial Bank Interest Margins and Profitability: Some International Evidence," World Bank Economic Review, World Bank Group, vol. 13(2), pages 379-408, May.
    3. Kosmidou, Kyriaki & Pasiouras, Fotios & Tsaklanganos, Angelos, 2007. "Domestic and multinational determinants of foreign bank profits: The case of Greek banks operating abroad," Journal of Multinational Financial Management, Elsevier, vol. 17(1), pages 1-15, February.
    4. Robert DeYoung & Tara Rice, 2004. "Noninterest Income and Financial Performance at U.S. Commercial Banks," The Financial Review, Eastern Finance Association, vol. 39(1), pages 101-127, February.
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