TITLE:
Determinants of Profitability in Zambian Banks: An Empirical Study from 2010 to 2020
AUTHORS:
Chresta C. Kaluba
KEYWORDS:
Prudential Information, Financial Indicators, Total Assets, Shareholders’ Equity, Liquid Assets, Deposits, Net Interest Income, Return on Assets (ROA), Financial Performance
JOURNAL NAME:
Open Journal of Business and Management,
Vol.12 No.5,
September
4,
2024
ABSTRACT: This study examines the determinants of profitability in the banking sector of Zambia between 2010 and 2020. Using prudential data obtained from the Bank of Zambia, the analysis focuses on the correlation between various financial variables and banks’ profitability, measured by Return on Assets (ROA). The study investigates the influence of Total Assets, Shareholders’ Equity, Liquid Assets, Deposits, Net Interest and Other Income, Investments in Securities, Gross Loans and Advances, and Non-Performing Loans on the profitability of Zambian banks. The findings reveal significant correlations between several key variables and banks’ profitability. Total Assets, Shareholders’ Equity, Liquid Assets, Deposits, Net Interest and Other Income, Investments in Securities, and Gross Loans and Advances exhibit positive correlations with profitability, suggesting that larger asset bases, stronger equity positions, adequate liquidity, stable deposit funding, higher income, prudent investments, and larger loan portfolios are associated with higher profitability. However, the relationship between Non-Performing Loans and profitability appears to be more nuanced, with variability observed among banks. These results underscore the importance of sound financial management practices in enhancing profitability and ensuring the stability of the banking sector in Zambia. The study contributes to the existing literature by providing insights into the determinants of profitability specific to the Zambian banking sector, thereby offering valuable information for policymakers, regulators, and industry stakeholders.