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What determines the profitability of banks? Evidence from Spain
Author(s) -
TrujilloPonce Antonio
Publication year - 2013
Publication title -
accounting and finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.645
H-Index - 49
eISSN - 1467-629X
pISSN - 0810-5391
DOI - 10.1111/j.1467-629x.2011.00466.x
Subject(s) - diseconomies of scale , profitability index , return on assets , business , monetary economics , financial system , capital (architecture) , scope (computer science) , return on capital employed , economics , economies of scale , finance , market economy , human capital , capital formation , financial capital , geography , archaeology , marketing , computer science , programming language
This paper empirically analyses the factors that determine the profitability of Spanish banks for the period of 1999–2009. We conclude that the high bank profitability during these years is associated with a large percentage of loans in total assets, a high proportion of customer deposits, good efficiency and a low doubtful assets ratio. In addition, higher capital ratios also increase the bank’s return, but only when return on assets (ROA) is used as the profitability measure. We find no evidence of either economies or diseconomies of scale or scope in the Spanish banking sector. Finally, our study reveals differences in the performance of commercial and savings banks.