Bank Specific Determinants of Commercial Bank Profitability in Bangladesh

Profitability of a bank is affected by both bank specific and macroeconomic factors. The present study quantifies how internal determinants contribute to the profitability of Bangladeshi Private Commercial Banks (PCBs) by using panel data. The sample includes 30 Dhaka Stock Exchange (DSEX) listed PCBs of Bangladesh over a period of 10 years covering from 2002 to 2012. The present study analyzed the data through advanced panel data models like robust estimation (Panel-corrected standard error; PCSE), generalized least square (GLS), feasible GLS, and fixed effect. Estimated results suggest that the main factors influencing PCBs’ profitability are bank size, bank capital, number of bank branches, and loans and advances. The empirical results demonstrate that bank size and capital exert significant positive effect on profitability, while deposits have negative effect on profitability. As very little empirical work has been undertaken to investigate the impacts of internal determinants of PCBs’ profitability in Bangladesh, the findings of this study may provide some significant insights for the policy makers to devise appropriate policies for the better performances of the PCBs in future.