Politická ekonomie 2022, 70(5):552-573 | DOI: 10.18267/j.polek.1366

Determinanty výnosnosti evropského bankovního systému v letech 2012-2019

Petra Jílková ORCID...a, Jana Kotěšovcová ORCID...b
a Vysoká škola ekonomická v Praze, Fakulta financí a účetnictví, Praha, Česká republika
b Vysoká škola finanční a správní, Praha, Česká republika

Determinants of European Bank Profitability in 2012–2019

This paper aims to find the microeconomic and macroeconomic determinants of European bank profitability from 2012 to 2019 using the regression model with the multicollinearity condition as a matrix parameter, the multicollinearity below the defined value, ensuring regression model reliability. The bank sector profitability is measured by return of average equity, return of average assets and net interest margin as dependent variables. The research creates a set of independent variables based on a literature review. The model is built on a sample of 3,257 European commercial banks for all EU countries excluding Romania due to missing data, and the input data were obtained based on the Orbis Focus Bank and the World Bank Database. The results revealed that the cost to income ratio and loan loss reserves to gross loans are the most important determinants of profitability of European commercial banks as measured by return of average assets. The results also show that GDP growth rate, inflation measured by the consumer prices and loan loss reserves to gross loans are the most important determinants for the net interest margin indicator. We recommend that commercial banks optimize the cost structure, create sufficient reserves, monitor the process of digital transformation and monitor credit risk indicators.

Keywords: Bank profitability, bank-specific determinants, industry-specific determinants, linear regression analysis, macroeconomic determinants, multicollinearity
JEL classification: C22, G21, M31, O16

Received: October 17, 2021; Revised: May 1, 2022; Accepted: July 1, 2022; Published: December 5, 2022  Show citation

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Jílková, P., & Kotěšovcová, J. (2022). Determinants of European Bank Profitability in 2012–2019. Politická ekonomie, 70(5), 552-573. doi: 10.18267/j.polek.1366
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    44. Petria, N., Capraru, B., Ihnatov, I. (2015). Determinants of Banks' Profitability: Evidence from EU 27 banking systems. Procedia Economics and Finance, 20, 518-524, https://doi.org/10.1016/S2212-5671(15)00104-5 Go to original source...
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    47. Rjoub, H., Civcir, I., Resatoglu, N. G. (2017). Micro and Macroeconomic Determinants of Stock Prices: The Case of Turkish Banking Sector. Romanian Journal of Economic Forecasting, 20(1), 150-166.
    48. Tan, Y., Floros, C. (2012). Bank profitability and GDP growth in China: a note. Journal of Chinese Economic and Business Studies, 10(3), 267-273, https://doi.org/10.1080/14765284.2012.703541 Go to original source...

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