Determinants of profitability of Nigerian deposit money banks

Abstract

This study investigates banks' specific and macroeconomic determinants of profitability of ten listed deposit money banks in Nigerian Stock Exchange from 2008 to 2017 using fixed effect regression. The result reveals that capital adequacy, nonperforming loan, loan to total asset and size have significant positive effect on profitability, while age was found to exert significant but negative effect on profitability. The study could not however establish sig-nificant positive effect of macroeconomic indi-cators (economic growth and interest rate) on profitability of deposit money banks while inf-lation rate has negative but insignificant influe-nce on profitability. Arising from the findings, the study recommends that government should initiate and execute economic policies that will improve the profitability of deposit money banks in Nigeria given the key role of the sector to the economy while banks should also mana-ge their specific variables that are likely to improve profitability.