An empirical analysis of the determinants of the U.S. banks’ profitability

Banks and Bank Systems

Ikechukwu Ndu¹  Emmanuel Anoruo²  Chiaku Chukwuogor³ 

[1] Ph.D., Assistant Professor of Accounting, Department of Accounting, University of Southern Maine;Ph.D., Professor of Economics and Finance, Department of Accounting, Data Science and Management Information Systems, COPPIN State University;Ph.D., Professor of Finance and Banking, Department of Economics and Finance, Eastern Connecticut State University;

关键词: bank profitability;    GMM;    loan loss reserves;    net interest margin;    return on assets;   

DOI  :  10.21511/bbs.16(4).2021.17

来源: DOAJ

【 摘 要 】

This study investigates the determinants of the profitability of U.S. banks. Employing quarterly data, this paper further examines the historical and recent trends for all U.S. banks from 1996 to 2019 in the relationship between return and assets (ROA) and other bank internal (or endogenous) profitability contributors such as net interest margin (NIM), loan loss reserves, ratio of non-performing loans to gross loans, and external (or exogenous) macroeconomic variables, such as the 30-year average mortgage rate, Gross Domestic Product (GDP) economic growth rate, unemployment rate, interest rate, inflation rate and openness (i.e., exports + imports/GDP) by using the Generalized Method of Moments (GMM) estimator technique. The results reveal that bank-specific variables, including net interest margin, loan loss reserves and non-performing loans, have a significant impact on bank profitability in the United States. Similarly, the results show that macroeconomic variables, namely the average mortgage rate, economic growth, and unemployment rate, exert significant effects on the U.S. banks’ profitability. The results further indicate that changes in openness are detrimental to bank profitability. The implications are discussed.

【 授权许可】

Unknown