Analysis of banks profitability: Domestic and foreign comparison

Abstract

Attempt at analyzing banks profitability informed this study. For sound and robust reviews of end report, the study took at comparing commercial banks across countries in Africa with emphasis on Nigeria, Ghana and South Africa owing to presumed position they occupy in the continent. To achieve its aims and from data provided by World Bank Group – International Monetary Funds, the study mirrored commercial banks profitability with total income (TI) hence, the dependent variable. The independent variables were proxied by total loan (TL) and customer deposits (CD). Data sets covers a ten (10) year period across cross –sections. Panel Autoregressive Distributed Lag (ARDL) regression of pooled ordinary least square, fixed effect model (FE) and random effect (REM) models, with Hausman Test of acceptance were specified. Similarly, Panel descriptive statistics and Panel Unit Rootstest were also tested and confirmed. Analysis was done with the aid of E-views statistical software v9. Results from the Panel ARDL finds Fixed Effect (FE) Model appropriate having taking into considerations the heterogeneity observations often not obseverded in the pooled ordinary least square and the randomnization effect in RE. By implication, findings indicate that total loan is statistically insignificant acorss sections showing a prob. 0.0714 with inverse correlation of 0.0169 while, customer deposit is statistically significant with a prob 0.000 and positive coefficient at 0.0480 as judged by the Hauman Test of 0.01 percent. However, the overall coefficient of determination shows high variability of close to one percent, while the model fitness is confirmed fit by F-statistic at 0.000. The study suggested conclusion is the provision of sound risk management via collaborative-business growth model for optimally banks benefit in the region.