Impact of asset and liability management on profitability of selected commercial banks in Ethiopia

The main objective of this study was to investigate the impact of asset and liability management on banks profitability. 11 commercial banks those which have data on financial statements for 8 years, for the period between 2010-2017were selected purposively and made use of SCA model to analyses data collected for the purpose of this study. Findings from this study reveal that all assets except fixed asset has positive and considerable effect on the profitability of commercial banks in the study area. Deposits and placing in other banks, loan and advance and short term investments have a positive and significant effect and the effect of long term investments and other assets is insignificant. However fixed asset is found to have a negative and significant effect. Furthermore from liability side, result of the study shows that saving and long term deposits are the main source of funds and on which commercial banks are incurring high cost followed by demand deposit. The surprising finding of this study was the effect of non-interest bearing liability on profitability of commercial banks in the country is found positive and significant. Banks in the country are recommended strength their asset and liability management especially for fixed assets.