Determinants of Commercial Bank profitability in Kenya

Abstract

The purpose of this research is to examine the relationship between bank specific (internal) and macro-economic (external) determinants of banks profitability. This is done by using data of all the banks in Kenya from the year 2005-2010. The paper uses the method of pooled ordinary least square to investigate the impact of loans, deposits, assets, capital, GDP and inflation on two major profitability indicators i.e. Return on Assets (ROA) and Return on Equity (ROE). The empirical results have found that both the internal and external factors have a strong and 'significant impact on banks profitability. The results of the study are• valuable to both policy makers and academicians.