Bank Specific, Industry Concentration, and Macroeconomic Determinants of Egyptian Banks' Profitability

Abstract

This paper aims to explain the elements that affect banks' profitability in the Egyptian banking sector during the period from 2006 to 2015. The researcher uses unbalanced panel annual data for 26 working banks in the Egyptian market. Generalized methods of moments (GMM) estimators are applied to define the most affected factors. Return on assets (ROE) and the return on equity (ROA) have been used as measurements of bank profitability. The findings of the study reveal that high profitability are associated with large bank size, large capital ratio and large operating income, while lower profitability is associated with higher non-interest income. As macroeconomic variables do affect profitability significantly, the researcher suggests that macroeconomic strategies that encourage low inflation and sustain growth rate, enhances loans expansion, boost banks' profitability.