Determinants of Bank Profitability

Banks profitability is given due attention after the great economic depression is experienced in the United States of America in 1940s. Due to United State sub-prime mortgage crisis that happened recently in 2007-2009, the banking sectors of many countries suffer huge losses, especially United State of America and European Union countries. The poor performance of the banking industry has slowed down the United State of America economy and also the growth of global economy until current period. In Asia, although the losses in banking sectors are not as serious as U.S., it is also hurting the economy. If the banking industry does not perform well, the effect to the economy could be huge and broad. Because, banks are the critical part of financial system, play a pivotal role in contributing to a country’s economic development (Rasidah and Mohd 2011). Commercial banks are the most dominant financial institutions in Ethiopia. The private sectors involvement started after Monetary and Banking proclamation No.83/1994. Ethiopian private commercial banking industry enjoyed high growth, high profits, and high dividends as per the access capital report 2010.