Abstract
In the present context the banking industry in Sri Lanka has become highly competitive. The country is filled with financial institutions more than required to serve the people in Sri Lanka. As a result of the stiff competition between the banks, it has become a real challenge for each of them to earn profit and there are many factors that influence the profitability of the banks. The study is all about the ABC Bank PLC in Sri Lanka and analyzed the determinants which have their impact on the profitability of the bank. There are internal and external variables influencing the profitability of the banking industry. The study especially analyzed the internal determinants which affect the profitability of the bank. There were number of studies done in the past and based on the studies the dependent variable has been identified as Return on Asset in order to measure the profitability and the following variables are identified as independent variables; Total Asset, Non-Interest Income, Cost Income ratio, Equity ratio and Loan Loss Provision/Total Loans. The analysis is done based on the secondary data published by the ABC Bank PLC. The empirical results exhibit the relationship between the dependent variable and the independent variables. Further the recommendations are given based on the empirical results from this study.
Highlights
In the present context, banks are having huge role and responsibility towards the country and its nationals
The adjusted R2 value came from the regression analysis 0.127 which means 12.7% of the total profitability influenced by the Total Asset of the bank
The finding is supported by the argument of Pasiouras and Kosmidou (2007); Smirlock (1985); Bikker and Hu (2002) that the total assets significantly contribute to the profitability in a positive manner
Summary
Banks are having huge role and responsibility towards the country and its nationals. Banks are the back born of the country’s economy. The primary objective of the bank is to maximize their bottom-line. The banks are compelled to compete with the internal and external forces which prevent them from generate profit. Profitability is very much important to a banking sector. Because it determines the survival of the institution (Dincer et al, 2016). It has a huge influence on the expansion of the bank network and growth of the organization. If the profitability of the bank is not up to expected standards, the bank will have to encounter many challenges like drop in stock prices, rating sector and etc
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