Factors Influencing the Bank Profitability - Empirical Evidence from Albania

Abstract

Commercial banks play a vital role in the economic resource allocation of countries. They contribute to economic growth of the country by making funds available for investors to borrow as well as financial deepening in the country. Corporate performance has been one of the most important issues of managers, investors, and analysts. This concern is connected to the significant role of the profitability of corporate organizations in general, and the banks in particular, on the potential growth of the economy as a whole. A study of the determinants of corporate profitability, therefore, could assist management, investors, and government to forecast and deal with the rising uncertainty of the globalised environment. The issue of the determinants of bank profitability is studied by different authors and academic and the purpose of this paper is to investigate the profitability behavior of bank-specific, industry related and macroeconomic determinants. The primary objective is to investigate the determinants of the profitability and to present all the debates through the literature review on the profitability of these important financial institutions, the banks. An important element of the macro-prudential analysis is the evidence of the internal and external factors and their relationship to the profitability of the banking sector and how this relationship is affected by institutional and structural characteristics. On the other hand internal factors of the banks influencing in the profitability are analyzed.