BANK PROFITABILITY DETERMINANTS: COMPARING THE UNITED STATES, NIGERIA AND SOUTH AFRICA

Peterson K Ozili

doi:10.32890/ijbf2021.16.1.4

Abstract

This study investigates the determinants of banking sector profitability in South Africa, Nigeria and the United States. The findings reveal that cost efficiency, the size of non-performing loans and overhead cost to total asset ratio are significant determinants of the banking sector profitability. In the comparative analysis, the findings from South Africa show that the cost efficiency ratio, overhead cost to total asset ratio and non-performing loans are significant determinants of the banking sector profitability. In the United States, capital adequacy ratio and the size of non-performing loans are significant determinants of its banking sector profitability. In Nigeria, the overhead cost to total asset ratio and cost efficiency ratio are significant determinants of the banking sector profitability. The descriptive analysis reveal that bank net interest margin and return on asset are higher in Nigeria and lowest in the United States which suggests that the Nigerian banking sector is more profitable than the US banking sector. Return on equity is higher in South Africa and lowest in the United States.

Highlights

This paper investigates the determinants of the banking sector profitability in Nigeria, South Africa and the United States
Return on Asset Before Tax (ROABT) and Net Income Margin (NIM) are higher in Nigeria and lowest in the United States
This paper examined the banking sector profitability determinants in South Africa, Nigeria and the United States

Summary

Introduction

This paper investigates the determinants of the banking sector profitability in Nigeria, South Africa and the United States. Banking sector profitability is an important indicator of a stable financial sector. Country-specific differences can affect the level of bank profit in unique ways. These differences may be amplified by differences in the level of financial development and the level of country development especially the differences in developed countries, emerging countries and developing countries. The focus on Nigeria, South Africa and the United States is due to the differences in the level of the financial sector and country development in the three countries. The literature shows that the level of financial (sector) development significantly affects bank profitability (see Demirgüç-Kunt & Huizinga, 2000)

Methods

Results

Conclusion