The Determinants Of Profitability Of Selected Private Commercial Banks In Ethiopia: Camel Approach

Abstract

The main objective of this study is to identify determinants of profitability of selected private commercial banks in Ethiopia using CAMEL approach. Under this study fifteen private banks (Nib, Wegagen, Awash, BOA, Berhan, CBO, Abay, Addis,, Lion, Bunna ,Zemen, DGB, Oromia, Hibret and, Dashen Banks) were selected for the study using purposive non random sampling. The panel data of 10 years from year 2013 to 2022 were used.Since the data is secondary in nature, the study used quantitative research approach.Fixed effect model was applied to investigate the impact of independent variables and ROA was used as dependent variable. The study used STATA software for the analysis. The factors used in this study include capital adequacy, management efficiency, asset quality, liquidity and net interest margin and ROA were used to m easure Banks profitability. The findings of the study show that net interest m argin, management efficiency, liquidity, asset quality and capital adequacy have statistically significant and positive relationship with profitability.The study suggests that in order to maintain the profitability of the commercial banks of Ethiopia, the bank management should have made critical follow up of the loan they provide to their customers to reduce non-performing loan and also the liquidity position of the banks should be given attention to address the immediate need of the customers of the banks