Determinants of Bank Profitability in UK on the Eve of the Brexit

Chris Grose (), Aglaia Kanella (), Theodoros Kargidis (), Mihaela Mocanu () and Τheodoros Spyridis ()
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Chris Grose: International Hellenic University
Aglaia Kanella: International Hellenic University
Theodoros Kargidis: International Hellenic University
Mihaela Mocanu: Bucharest University of Economic Studies
Τheodoros Spyridis: Independent Authority for Public Revenue

A chapter in The Changing Financial Landscape, 2021, pp 187-203 from Springer

Abstract: Abstract The paper analyses bank profitability in a sample of UK commercial banks during the period 2007–2018. The models measuring profitability include as dependent variables the Return on Average Assets (ROAA), Return on Average Equity (ROAE) and Net Interest Margin (NIM) while explanatory variables used include a set of internal (bank-specific) and external macroeconomic factors. The results indicate that bank profitability is not only affected by internal-/bank-specific factors, but also affected by macroeconomic indicators. While largely findings corroborate general pertinent literature findings, they provide and up-to-date outlook on bank profitability in the UK on the eve of the Brexit. The findings of the analysis indicate that the size of the banks has a negative role in the profitability due to the existence of economies of scale for the smaller banks and diseconomies for the larger. Additionally, as far as the external macroeconomic factors are concerned, the sign of GDP per capital growth varies and depends on the measurements of profitability. It can be assumed that the macroeconomic factors affects the profitability of the banking sector.

Keywords: Profitability; Banks; Bank-specific factors; Macroeconomic factors; UK Brexit; G20; G21 (search for similar items in EconPapers)
Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:spr:conchp:978-3-030-82778-6_11

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DOI: 10.1007/978-3-030-82778-6_11

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