Profitability of Commercial Banks in Bangladesh:A Multivariate Analysis

Abstract

This paper is in an attempt to examine the financial performance of privatelisted commercial banks in Bangladesh in terms of profitability. The study is based on cross-section data of annual financial statements of 15 listed commercial banks for the period 2008-2012. Five determinants have been chosen for this study. The Correlation matrix shows that profitability, asset quality, operating performance ,bank size and liquidity position are related positively but profitability and capital adequacy are related negatively.Step-wise regression method is followed to show the cause-effect relationship of the variables. This method identifies three models and automatically eliminates the insignificant variablesfollowing three steps and finally select model 3.This model is the best combination of the variables under analysis that most describes the profitability.It considersasset quality, operating performance and bank sizeas significant determinants of profitability.On the other hand, liquidity position has positive butinsignificant effect on profitability.