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The Determinants of Commercial Bank Interest Margin and Profitability: Evidence from Tunisia

Sami Ben Naceur

International Monetary Fund (IMF); ESSEC Tunis

Mohamed Goaied

IHEC Carthage

August 30, 2005

This paper investigates the impact of banks' characteristics, financial structure and macroeconomic indicators on banks' net interest margins and profitability in the Tunisian banking industry for the 1980-2000 period. First, individual bank characteristics explain a substantial part of the within-country variation in bank interest margins and net profitability. High net interest margin and profitability tend to be associated with banks that hold a relatively high amount of capital, and with large overheads. Second, the paper finds that the inflation has a positive impact on banks' net interest margin while economic growth has no incidence Third, turning to financial structure and its impact on banks' interest margin and profitability, we find that concentration is less beneficial to the Tunisian commercial banks than competition. Stock market development has a positive effect on bank profitability. This reflects the complementarities between bank and stock market growth. We have found that the disintermediation of the Tunisian financial system is favourable to the banking sector profitability.

Number of Pages in PDF File: 23

Keywords: bank interest margin, bank profitability, panel data, Tunisia

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Date posted: November 28, 2005  

Suggested Citation

Ben Naceur, Sami and Goaied, Mohamed, The Determinants of Commercial Bank Interest Margin and Profitability: Evidence from Tunisia (August 30, 2005). Available at SSRN: http://ssrn.com/abstract=856365 or http://dx.doi.org/10.2139/ssrn.856365

Contact Information

Sami Ben Naceur (Contact Author)
International Monetary Fund (IMF) ( email )
700 19th Street, N.W.
Washington, DC 20431
United States
ESSEC Tunis ( email )
4 rue Abou Zakaria El Hafsi
Montfleury, 1089
Mohamed Goaied
IHEC Carthage ( email )
Carthage 2016
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