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

Eurico Lionjanga Cangombe, Luís Gomes Almeida () and Fernando Oliveira Tavares
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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
Fernando Oliveira Tavares: REMIT—Research on Economics, Management and Information Technologies, Department of Economics and Management, Universidade Portucalense, 4200-027 Porto, Portugal

Risks, 2025, vol. 13, issue 7, 1-21

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.

Keywords: bank profitability; Angolan banking sector; panel data analysis; financial performance; banking sector economics; emerging markets (search for similar items in EconPapers)
JEL-codes: C G0 G1 G2 G3 K2 M2 M4 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:gam:jrisks:v:13:y:2025:i:7:p:123-:d:1689018

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