Abstract:
This paper seeks to investigate the determinants of banking network profitability in Iran from 2007 to 2012. The results of our study indicate that both bank-specific factors and macroeconomic factors influence banks’ profitability in Iran. Results confirm that bank profitability is significantly influenced by investment to total assets ratio, non-performing loans to total assets ratio, and time deposit to total assets ratio. Among external factors, it turns out that economic growth rate has a significant positive impact on bank profitability.
Machine summary:
"The results of table 1 also shows that banks’ profit margin, non- performing loans and banks assets size growth rate experience strong instability because the amount of standard deviation is more than one in these variables.
Starting from the general model and considering the selected variables, the empirical model used in our study is: (2) PMARit = C +β1ITAit + β2DDAit + β3TDAit + β4NPLA (-1) it + β5GDPPERit + β6ITA (-1)it + β7SIZEPERit + β8STD (-1) it + εit Where the major determinants of profit margin (PMAR) in equation (2) are ITA (Investment to Total Assets), DDA (Demand Deposit to Total Assets ), TDA (Time Deposit to Total Assets), NPLA (-1) (Non-performing Loans to Total Assets with one year lag), GDPPER (Growth Rate of Gross Demostic Products), ITA (-1) (Investment to Total Assets with one year lag), SIZEPER (Growth Rate of banks assets size ), and STD(-1) (Saving Deposit to Total Deposits).
The GDPper variable showing the growth rate of Gross Domestic Product is an important determinant of the profitability and the coefficient being statistically significant at 5% significance level and is in line with the expectations which indicate a positive rapport with the banking profitability.
7. Conclusion Investigating the bank–specific and macroeconomic determinants of profitability for 29 banks in Iran, the empirical results of our study highlight the fact that investment over total assets ratio, and GDP growth rate are positively influencing the profitability."