Abstract
For adequate profitability management, it is important to identify all the factors that lead to its rise or fall, as well as to determine the intensity of correlation between relevant factors and profitability. This is to take timely and adequate measures to eliminate deviations arising from the expected profitability and improve it in the future period. The research subject is bank profitability in the Republic of Serbia in the period 2012-2015. The research objective is to outline the possible factors of bank profitability, with particular reference to internal factors of banking sector profitability in the Republic of Serbia. Research results show a high degree of correlation between the ROA and ROE profitability ratios, both statically and dynamically; dynamics of profitability ratios is in inverse correlation with capital adequacy ratio; there is a link between bank size and profitability and a link between the change of bank ownership and profitability, but it does not necessarily mean that foreign banks are more profitable than domestic banks.
Highlights
A modern business environment imposes new demands on managers in the process of adopting and implementing management and business decisions
As for macroeconomic indicators, the results show that economic growth has a positive and significant impact, while inflation has no significant impact on bank profitability
The results show that bank factors and market factors affect bank profitability, but macroeconomic factors do not
Summary
A modern business environment imposes new demands on managers in the process of adopting and implementing management and business decisions. The role of commercial banks and their efficiency, above all, profitability, has been the subject of academic research for many years This applies both to developed market economies and transition economies, as the one of the Republic of Serbia. In the 1990s, the banking sector in the Republic of Serbia was ruined, primarily due to the conditions characterizing the environment in which the banks operated At the time of a global decline in confidence in the banking system, any connection with European banks that experienced losses with securitized securities is an additional factor affecting financial crisis spillover. Judging by the current situation, it is obvious that the crisis did not significantly affect the banking sector of the Republic of Serbia, which is still relatively stable, highly liquid, and adequately capitalized.
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