Bank Profitability Case Study

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Profitability is an important measure that describes the associations of total amount of profit with various factors. And this study is talking about the influence of commercial banks determinants on the performance of commercial bank in Canada over the time period from 2005-2010. The significant part to success for most financial institution is consistency and steady running. As a result, profitability is the most important and consistent indicator as it contributes huge amount of profit that ultimately impacts its performance. And the commercial bank’s profitability is calculated out by the return on equity (ROE) and net-interest margin (NIM). This result explains that the capital strength of a bank is most significance in affecting its performance …show more content…
Return on equity is net profit before tax over the equity capital. Berger (1995) this ratio is talking about the connection between return on equity and capital adequacy ratio for a group of US bans from 1983-1992 and use a constructive link among both factors.
International banks have more interest margin as compare to the local banks in poor states and inverse situation is approved. A research of 80 countries from 1988-1995 conducted on interest margin and profitability by (Demirguc-Kunt & Huizingga, 1999.) he mentioned that differences are huge because of high interest rate, as less proficient bank and large reserve demand by (Gelos, 2006). And deposit has important relationship with interest margin as explore by (Baum, Caglayyan & Talavera,
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Significant connection between the capital ratio and profitability is not restricted to USA local banking industry as a study of 18 countries from 1986-1989 explained that Capital ratio impacts bank profitability positively even thought such association restricted to sate own banks (Molyneux & Thornton, 1992). They also mentioned that a positive association between the capital ratio and bank profitability and overseas banks earn more return as compare to local banks in developing

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