The Determinants of Banks¡¯ Profitability under Basel Regulations: Evidence from Lebanon

Iktimal Abdel Reda, Husam Rjoub and Ahmad Abu Alrub

International Journal of Economics and Finance, 2016, vol. 8, issue 10, 206-219

Abstract: The purpose of this study is to shed some lights on the determinants of banks¡¯ profitability operating in Lebanon. Through applying Panel ¡°EGLS period SUR¡± technique, for the period spans from 2000 to 2015. We have used a set of micro factors that might affect the banks¡¯ profitability such as; asset quality, liquidity, and capital adequacy, on a sample of twenty four banks operating in Lebanon. Net Interest Margin (NIM) has been used to measure the profitability. The results indicate that most positive powerful effects on NIM are Equity to Liability, and Interest rate on Deposits (on Average), and to a lower extent Loan Loss Reserve to Impairment Loans, the Impaired Loans to Equity, Liquid Assets to Total Deposits and Borrowings, whereas, Capital Funds to Liability, loan loss provision to net interest revenue, are the most significant but with a negative effect; and to lower extent Net charge Off to Average gross loans, Net loans to deposits and short term borrowing affect the NIM negatively. Our findings revealed that banks perform better when they maintain higher level of equity relative to their Liabilities, and then can achieve a higher level of profitability.

Keywords: banks¡¯ profitability; assets quality; liquidity; capital adequacy; and panel EGLS (search for similar items in EconPapers)
Date: 2016
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Persistent link: https://EconPapers.repec.org/RePEc:ibn:ijefaa:v:8:y:2016:i:10:p:206-219

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