The Effect Of Asset- Liability Management On Profitability Of Private Commercial Banks In Ethiopia

Abstract

The study was conducted to identify the effect of asset liability management on the profitability of private commercial banks in Ethiopia. The objective of this study was to examine how asset liability management effects the profitability of these banks. The study employed both descriptive and explanatory research designs, along with a quantitative research approach. The target population consisted of 29 private commercial banks, with a sample of 10 banks selected based on data availability and operational experience from 2014 to 2023. Annual audit reports and yearly financial statements, were collected from the National Bank of Ethiopia and profit/loss statements from individual banks. The key variables include deposits, loans, investments, liabilities, retained earnings, and bank size. The collected data were analyzed using the Statistical Package for the Social Sciences version 26. A multiple linear regression model was employed to show the relationship between the independent variables and the dependent variable. The findings of the study revealed that deposits, retained earnings, and bank size significantly affect profitability. Deposits and retained earnings, in particular, were found to be highly influential, while loans and other investments had moderate effects. Bank liabilities showed minimal effect. The study recommended that to boost profitability and stability, banks should attract deposits, manage loans effectively, retain profits for growth, and control leverage. Strategic growth, regular investment reviews, and continuous adjustment of asset-liability management are essential.