Determinants of Profitability in Nigerian Listed Deposit Money Banks
Determinants of Profitability in Nigerian Listed Deposit Money Banks

Summary/Abstract: The study examines the determinants of profitability of ten deposit money banks in Nigeria over the period 2007-2016. Five potential bank-specific factors (non-performing loan, capital adequacy, size, deposit growth and age) and three macroeconomic factors (real interest rate, growth in GDP and inflation rate) were considered. Using Random Effects Generalized Least Squares estimation technique, the findings suggest that banks’ profitability is only affected by bank-specific factors while macroeconomic variables seem to have no influence. Consistent with theoretical expectation, results show a negative and statistically significant relationship between non-performing loan ratio and bank profitability as well as a direct relationship between profitability and capital adequacy ratio. The three macroeconomic variables have insignificant relationship with bank profitability. It is recommended that bank management consider non-performing loan and capital adequacy as relevant factors when issues relating to prescription of policy on profitability of banks are discussed and formulated

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