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Determinants of Banking Profitability in Angola: A Panel Data Analysis with Dynamic GMM Estimation

Author

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  • Eurico Lionjanga Cangombe

    (Faculty of Economics and Business, University of Vigo, 36310 Vigo, Spain)

  • Luís Gomes Almeida

    (GOVCOPP—Research Unit on Governance, Competitiveness and Public Policies, Higher Institute of Accounting and Administration of Aveiro, Aveiro University, 3810-193 Aveiro, Portugal
    RGEAF Group Research-ECOBAS, University of Vigo, 36310 Vigo, Spain)

  • Fernando Oliveira Tavares

    (REMIT—Research on Economics, Management and Information Technologies, Department of Economics and Management, Universidade Portucalense, 4200-027 Porto, Portugal
    Instituto Superior Miguel Torga, Largo da Cruz de Celas nº 1, 3000-132 Coimbra, Portugal)

Abstract

This study aims to analyze the determinants of bank profitability in Angola by employing panel data econometric models, specifically, the Generalized Method of Moments (GMM), to assess the impact of internal and external factors on the financial indicators ROE, ROA, and NIM for the period 2016 to 2023. The results reveal that credit risk, operational efficiency, and liquidity are critical determinants of banking performance. Effective credit risk management and cost optimization are essential for the sector’s stability. Banking concentration presents mixed effects, enhancing net interest income while potentially undermining efficiency. Economic growth supports profitability, whereas inflation exerts a negative influence. The COVID-19 pandemic worsened asset quality, increased credit risk, and led to a rise in non-performing loans and provisions. Reforms implemented by the National Bank of Angola have contributed to strengthening the banking system’s resilience through restructuring and regulatory improvements. The rise of digitalization and fintech presents opportunities to enhance financial inclusion and efficiency, although their success relies on advancing financial literacy. This study contributes to the literature by providing updated empirical evidence on the factors influencing bank profitability within an emerging economy’s distinctive institutional and economic context.

Suggested Citation

  • Eurico Lionjanga Cangombe & Luís Gomes Almeida & Fernando Oliveira Tavares, 2025. "Determinants of Banking Profitability in Angola: A Panel Data Analysis with Dynamic GMM Estimation," Risks, MDPI, vol. 13(7), pages 1-21, June.
    • Handle: RePEc:gam:jrisks:v:13:y:2025:i:7:p:123-:d:1689018
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    References listed on IDEAS

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    1. Tiago M. Dutra & João C. A. Teixeira & José Carlos Dias, 2024. "The effect of political institutions on the interplay between banking regulation and banks’ risk," Journal of Banking Regulation, Palgrave Macmillan, vol. 25(2), pages 179-196, June.
    2. Wang, Yang & Xiuping, Sui & Zhang, Qi, 2021. "Can fintech improve the efficiency of commercial banks? —An analysis based on big data," Research in International Business and Finance, Elsevier, vol. 55(C).
    3. Mohamed Dia & Amirmohsen Golmohammadi & Pawoumodom M. Takouda, 2020. "Relative Efficiency of Canadian Banks: A Three-Stage Network Bootstrap DEA," JRFM, MDPI, vol. 13(4), pages 1-25, April.
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