The Determinants Of Banks’ Pprofitability:Evidence From CEMAC Countries

Commercial bank as an intermediary for the financing of social and economic services,its business performance is one of the important factors to determine any country’s economic development.However,in recent years,the banking business environment has undergone worldwide major changes;the bank’s operating performance has been influenced by various factors,internal and external.Compared with other developing countries,the Central African Economic and Monetary Community(CEMAC)countries banking performance is still poor,characterized by low levels of credit to the private sector,high rates of interest rates and lack of information.Therefore,this study aims to investigate the determinants of commercial banks’ profitability CEMAC countries.This paper selected 33 commercial banks out of the 50 commercial banks of the six countries of CEMAC as sample data.The study covered the period 2005-2014.ROA and ROE are considered as a measure of bank profitability,the internal factors(size,capital adequacy ratio,deposit growth,indirect costs,and credit risk)and external factors or macroeconomic factors(GDP and inflation)are used as explanatory variables.ROA and ROE regression analysis were performed using a fixed and random effect estimator.The results show that credit risk and overheads are the main determinants of the profitability of the CEMAC countries commercial banks.At the same time,we also found that macroeconomic factors such as GDP are negatively correlated with the bank’s return on assets but do not affect the return on equity of banks.In addition,CEMAC’s countries banking profitability is not affected by fluctuations in inflation.