DETERMINANTS OF PROFITABILITY OF PRIVATE COMMERCIAL BANKS IN ETHIOPIA

Abstract

The major objective of the study is to examines determinates of profitability of private commercial Banks of Ethiopia using quantitative research method. The study investigates both internal and external determinants of profitability for the period 2012 - 2016. The secondary data were obtained from annual reports of each bank. It was found that profit of commercial banks significantly and negatively influenced by capital reserve, liquidity assets, and non- performing loan. NBE bill purchasing regulatory and inflation rate also affect profitability of commercial banks significantly and negatively. The rest variables such as Banks size, Loan growth, and GDP positively influence profitability of the studies commercial banks, By those given result, management bodies of private commercial banks should strive to strengthen and widening other income generating sources such as Agent Banking to reach untapped market, Paperless service to decrease the service delivery process and others and then ,can also prevent themselves from liquidity risk by gaining sufficient cash, beside this banks should make increase their loan growth by controlling their customers(borrowers) by strengthen their inspection techniques to identifying quality borrowers, gathering sufficient information about the borrowers, improve poor enforcement of creditor rights and obligation in order to control non-performing loan. If there is and strengthening the legal environment of the business.