Determinants of bank profitability: a panel data analysis from Bangladesh

Abstract

Bank profitability is central to financial stability in emerging economies such as Bangladesh, where rising non-performing loans, high leverage, and Basel III liquidity requirements create significant challenges. This study investigates the determinants of return on assets (ROA) in 15 top-performing listed private commercial banks over the last decade (2015–2024) using a fixed-effects panel regression model. The analysis considers traditional financial ratios, including gross non-performing loans (NPLs), debt-to-equity ratio, deposit-to-asset ratio, and cost-to-income ratio, as well as Basel III liquidity measures. Results show that higher NPLs and leverage significantly reduce ROA, while a stronger deposit base enhances profitability. In contrast, the cost-to-income ratio and Basel III liquidity ratios have no statistically significant effect. These findings highlight that asset quality, capital structure, and funding composition dominate profitability outcomes in Bangladesh, offering important implications for bank managers and regulators seeking to balance financial stability with sustainable profitability.