Determinants of the financial performance of a private commercial bank in Ethiopia

Abstract

This study examines the determinants of financial performance of a private commercial bank by using the monthly financial statement of Bank ''X''3 from 2011 to 2016. A quantitative research approach was adopted, and the data were estimated using the Ordinary Least Square approach of multiple linear regression model. The study examined only internal factors such as capital adequacy, loan to deposit ratio, income diversification, operating efficiency, export, liquidity, loan performance and deposit mobilization as explanatory variables. Return on Asset, Return on Equity and Net Interest Margin were used as dependant variables to measure the financial performance of the Bank. The finding of the study revealed that income diversification, deposit amount, export level and loan performance have a significant influence on the financial performance of Bank ''X''. Therefore, it is recommended that commercial banks should increase export proceed, capital and loan production, and should diversify the sources of non-interest incomes in order to improve financial performances, and stay competitive enough in the banking industry.

Keywords: Financial performance, Net Interest Margin, Return on Asset, Return on Equity, Private Commercial Bank, Ethiopia