Determinants of Commercial Banks Profitability: Empirical Evidence from Ethiopia

This paper attempted to investigate the effect of branches, loan, ownership structure, deposits and bank size on profitability of Ethiopian commercial banks using the panel data collected from eight banks. The study period ranges from 2001 to 2013. Net interest margin (NIM) is used as the only measure of profitability in this study. Multiple regression analysis model is employed to estimate the effect of each variable over the profitability of banks. The empirical findings of the Pooled OLS regression model depicted that number of branches, total loan to total deposit ratio and ownership structure have a positive and statistically significant impact on the profitability of Ethiopian commercial banks. However, the effect of deposit to total asset ratio on NIM is negative and insignificant while size has shown a positive but insignificant effect over profitability of commercial banks.