Determinants of Bank Profits and Net Interest Margins in East Asia and Latin America

36 Pages Posted: 19 Aug 2011

See all articles by Rubi Ahmad

Rubi Ahmad

University of Malaya (UM)

Shahrin Saaid Shaharuddin

University of Malaya (UM) - Faculty of Business & Accountancy

Low Mui Tin

Central Bank of Malaysia

Date Written: March 1, 2011

Abstract

This paper identifies the determinants of bank profits and net interest margins using a balanced panel of 167 banks for the period of 2003-2008. Of the 167 banks, 78 banks represent East Asia, while the balance of 89 banks represents Latin America. Our fixed effects regression model strongly indicates that gross domestic product, bank concentration and inflation have weak influence on bank profitability while bank size, capital adequacy, liquidity ratio, cost-income ratio and loan loss reserves are statistically significant. Bank-unique characteristics rather than macroeconomic variables seem to explain a substantial part of within-country variation in bank profits and net interest margins.

Keywords: bank profits, East Asia, Latin America, bank-unique factors, macroeconomic factors, net interest margins, return on assets, concentration ratio

JEL Classification: G21, D21

Suggested Citation

Ahmad, Rubi and Shaharuddin, Shahrin Saaid and Tin, Low Mui, Determinants of Bank Profits and Net Interest Margins in East Asia and Latin America (March 1, 2011). Available at SSRN: https://ssrn.com/abstract=1912319 or http://dx.doi.org/10.2139/ssrn.1912319

Rubi Ahmad (Contact Author)

University of Malaya (UM) ( email )

Kuala Lumpur, Wilayah Persekutuan 50603
University of Malaya (UM)
Kuala Lumpur, Wilayah Persekutuan 50603
Malaysia
+603 79673961 (Phone)

Shahrin Saaid Shaharuddin

University of Malaya (UM) - Faculty of Business & Accountancy

Jalan Lembah Pantai
Kuala Lumpur, Wilayah Persekutuan 50603
Malaysia

Low Mui Tin

Central Bank of Malaysia

Jalan Dato' Onn
P.O. Box 10922
Kuala Lumpur, 50929
Malaysia

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