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https://doi.org/10.1057/s41599-023-02545-6 OPEN

A global analysis of bank profitability factors

Prosper Lamothe1, Enrique Delgado 1, Miguel A. Solano2 & Sergio M. Fernández3 ✉

We analyze the factors that explain banks’ profitability globally and by region. With
increasing globalization, knowing the different aspects of bank profitability is essential for
countries’ financial stability and economic growth. This study used a sample of 2,091 com-
1234567890():,;

mercial banks operating in 110 countries grouped into major world regions. With random
effect regression models, the global results show that the internal factors that explain the
bank´s profitability are listed entities, impaired loans, efficiency, gross interest margin, and
capitalization. For its part, the most significant external factors are related to the position of
the countries in the ranking by assets, inflation, unemployment, interest rates, and economic
growth. From a regional perspective, the results allow us to deduce with high robustness the
existence of variable sets that determine bank profitability in each region and that regional
models outperform global models in most cases.

1 Universidad Autónoma de Madrid, Madrid, Spain. 2 Universidad de Granada, Granada, Spain. 3 Universidad de Málaga, Málaga, Spain.
✉email: [email protected]

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T
Introduction
he financial system is essential in channeling funds to banking profitability have focused on a single country or region,
investments efficiently, supporting economic growth in with few addressing this problem from a global perspective (Al-
developed and developing countries (Al-Harbi 2019; Luo, Harbi 2019; Ercegovac et al. 2020). Besides, existing studies have
Tanna and De Vita 2016). One key element of a financial system generally been conducted only on banks in developing countries,
is the banks, which perform the intermediation function between the United States of America, and Europe (Abreu and Mendes
suppliers and applicants of funds and collaborate in the imple- 2001; Athanasoglou et al. 2006; Chiorazzo and Milani 2011;
mentation of the monetary policy of a country. Therefore, banks Growe et al. 2014; Petria et al. 2015; Menicucci and Paolucci
can contribute to ensuring the continuity of economic growth 2016; Korytowski 2018; Yao et al. 2018; Yüksel et al. 2018).
and financial system stability (Ofori-Sasu et al. 2022; Feng and Le and Ngo (2020) investigated the determinants of bank
Wang 2018). Likewise, with deregulations, technological advan- profitability in 23 countries from 2002–2016. Their results con-
ces, and global economic integration, the banking sector is more firm a positive relationship between capital market development
globalized, and understanding the different aspects of banking and bank profitability. Menicucci and Paolucci (2016) analyzed
globalization is essential for the financial stability of countries Europe and Hoffmann (2011) for the United States of America.
(Yin 2019). In this context, bank profitability has been the object Feng and Wang (2018) studied why European banking is less
of study by bank researchers, managers, and supervisors with a profitable than American banking. They concluded that European
high interest in knowing the impact of this process. However, banking has higher financing costs, which implies lower efficiency
most studies investigating the determinants of bank profitability and, consequently, lower rates of return on assets. For their part,
did not include all regions or did not make a global comparison Caterini et al. (2021) and Ercegovac et al. (2020) investigated the
between a large number of countries (Le and Ngo 2020; Le et al. relationship between the different models of each banking system
2022; Yuan et al. 2022; Sun, Mohamad and Ariff 2017; Rekik and in Europe and each country’s risk and return profile. They con-
Kalai 2018; Yanikkaya et al. 2018). Therefore, a study across cluded that European banks with the best risk profile and effi-
countries and regions at the global level allows us to incorporate ciency are also the most profitable. Recently, Kozak (2021)
more information to form a complete bank data set. Only the reminded us that, for Central, Eastern, and South European
study by Ho et al. (2023) has covered many countries (90 countries, overcoming COVID-19 does not mean that the risk of
countries) from all regions of the world. Thus, previous literature banks incurring provisions for credit deterioration disappears and
calls for new studies that collect more financial and economic that this negatively affects profitability. Çolak and Öztekin (2021)
data and include global samples of countries and regions, which have also analyzed the impact of COVID-19 on the ability of
would provide more precise research by harmonizing the pro- banks in 125 countries to continue generating credit investment.
blem of banks’ profit-making (Yuan et al. (2022); Ercegovac et al. Their results indicate that the countries with the most developed
2020). and robust financial systems are the ones that have shown the
To cover this gap in research, the present study analyzes the best resilience despite the crisis in terms of loan growth. Likewise,
factors that explain banking profitability using a sample of 2,091 Le et al. (2022) have investigated the relationship between
conventional commercial banks operating in 110 countries, diversification and profitability in Islamic banking systems under
grouped into the eight central regions of the world. This paper the impact of COVID-19. Using a sample of 24 countries for the
contributes to the field of bank profitability in several significant period 2013–2020, their results indicate that the performance of
ways. First, it contributes to the growth of profitability factors Islamic banking systems is positively associated with sectoral
analysis by introducing new global and regional models that diversification of Shari’ah-compliant financing. Furthermore, this
improve the understanding of the bank profitability´ formation diversification has mitigated the adverse effect of the health crisis
process. As the bank industry embraces global economic inte- derived from COVID-19 on the performance of Islamic banking
gration, providing international empirical evidence from a broad systems. Ho et al. (2023) also confirmed that bank income
database on the factors that drive bank profitability is essential. diversification reduces the adverse effects of COVID-19 using
This document provides an analysis from 2018 to 2021, covering data from 1231 banks in 90 countries. Gazi et al. (2022a) inves-
110 countries in major regions of the world (Africa, Eastern tigated the impact of COVID-19 on the financial performance
Europe, Far East and Central Asia, Middle East, North America, and profitability of listed private commercial banks in Bangla-
Oceania, South and Central America, and Western Europe). desh. They found that during the pandemic period, high rates of
Second, this research explains how the current globalization non-performing loans, holding more liquid assets, large amounts
process extends from the internal characteristics of the entities to of cover capital, and inadequate size reduced banks’ profitability.
the external factors of the regions´ macroeconomic environment. Gazi et al. (2022b) also found that the financial performance of
It can also be a starting point for future research in this field. Islamic banks is superior to that of traditional banks. For its part,
Third, this document offers unique sets of variables for global Almaqtari et al. (2019) analyzed the factors determining com-
analysis and each of the world´s main regions, allowing you to mercial banks´ profitability in India and Pakistan. Their results
minimize the cost of building simulation models to improve bank determined that bank size, operating efficiency, leverage ratio,
profitability. and inflation rate are the most critical determinants affecting
The rest of the paper is organized as follows. Section 2 presents bank profitability. And, Yuan et al. (2022) investigated the impact
a review of the literature. Section 3 describes the data, variables, of profitability determinants on commercial banks of Bangladesh
and methods used. Section 4 presents the results and a discussion and India in the period 2010–2021. They find that bank size and
of them. Finally, the main conclusions, implications, and sug- debt-to-asset ratio are positive and significant.
gestions for future research are presented. Previous literature divides the factors affecting bank profit-
ability into internal and external categories. Numerous explana-
tory variables have been proposed for both classes, depending on
Literature review the type and objective of each study. The internal factors of
In recent years, the study of bank profitability has increased due profitability can be classified into financial statement variables
to globalization, the impact of COVID-19, and negative interest and non-financial statement variables, both under the control of
rates (Ercegovac et al. 2020; Korytowski 2018; López-Penabad bank management (Haron 2004). Those that refer to capital
et al. 2022; Yin 2019; Yüksel et al. 2018). Previous studies on adequacy, volumes of deposits and credits, and liquidity stand out

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among them. External factors are outside bank management´s Table 1 Sample composition (%).
control but impact its economic and financial structure.
According to Haron (2004), competition, concentration, market
World Region Year
share, capitalization, inflation, and the size of banks are the most
discussed external variables. Africa (A) 1.00 2018 24.68
Among the internal factors, several previous studies indicate Eastern Europe (E) 4.36 2019 26.50
Far East and Central Asia (F) 38.38 2020 27.45
that banks with a high capital ratio are more flexible in con-
Middle East (M) 1.04 2021 21.37
ducting business and taking advantage of new opportunities, so it North America (N) 19.38 Listed in the
can be expected that more capitalized banks will achieve higher stock exchange
profitability (Al-Harbi 2019). However, some studies have con- (LIS)
firmed a negative relationship between profitability and a high Oceania (O) 2.03 Yes 29.17
capital index due to the assumption of lower risks, which pro- South and Central America (S) 4.89 No 70.83
duces lower returns (Saona 2016). Therefore, although the Western Europe (W) 28.91
empirical evidence on the relationship between the capital ratio Total Worldwide (WW) N = 4721 100.00
and profitability is inconclusive, the effect of bank capitalization
could be a significant factor in explaining profitability. For their
discourages people and companies from taking out new loans,
part, deposits represent one of the primary sources of financing
causing a decrease in bank profits in the long term (Staikouras
for banks, and due to their low cost, they can also positively affect
and Wood 2003; Noman et al. 2015; Islam and Nishiyama 2016).
profitability (Chirwa 2003; Saona 2016; Menicucci and Paolucci
However, this effect can be positive in developing countries (Al-
2016). However, some studies show evidence of an adverse effect
Harbi 2019; Feng and Wang 2018). In some studies, the country’s
of deposits on profitability in the face of a lack of loan demand or
stock market has been related to bank profitability (Borroni et al.
poor liquidity management (Akbas 2012; Tariq et al. 2014), or
2016). A positive effect is expected for this variable because
even an insignificant relationship (Demirgüc-Kunt and Huizinga,
developed stock markets increase the information available to
1999; Soyemi et al. 2013). Likewise, a positive effect of the loans
banks, allowing them to assess risks better. Likewise, banks
granted to clients on bank profitability has been detected since
benefit from the commissions from managing their client’s
more loans imply new income for the entities (Heffernan and Fu
portfolios. However, a prominent securities market could nega-
2008; Sufian 2012; Menicucci and Paolucci 2016). However, other
tively affect the banks’ profitability since this market can sub-
factors can cause an increase in loans to impact profitability
stitute them as a source of financing. It has also been found that
negatively. For example, banks are sensitive to macroeconomic
the larger a country´s banking sector, the more competition exists
conditions, and during periods of crisis, many loans may become
between its entities, which leads to lower profitability (Demirgüc-
uncollectible (Heffernan and Fu 2008). Therefore, there is evi-
Kunt and Huizinga, 1999). But, a large banking sector can also
dence to expect a significant effect of the loan volume on prof-
provide more business and cost reduction opportunities,
itability; consequently, some studies consider impaired loan
increasing profitability and margins (Ghosh 2016). Similarly,
percentage as another internal factor of bank profitability (Kos-
market concentration can affect returns. In this sense, some
midou et al. 2005).
studies detect a positive relationship (Demirgüç-Kunt and
On the other hand, cost management efficiency has also been
Huizinga 2000), while others indicate that more concentration
highlighted in previous literature as an internal profitability factor.
does not necessarily imply greater profitability (Ben Ameur and
A positive relationship between efficiency and profitability indi-
Mhiri 2013).
cates that efficient banks operate at lower costs or that they manage
to transfer part of their costs to customers (Al-Harbi 2019;
Pasiouras et al. 2009). Yuen et al. (2022) studied the global banking Data, methods, and variables
sector. They found that adopting standards of the environment, This study uses data from a sample of 2091 banks from 110
social, and governance (ESG) activities could increase banking countries. These data are mainly individual financial indicators
costs and reduce bank profitability. Similarly, entity size has also for each bank and come from the Orbis Bank Focus by Moody´s
been related to scale economies. Previous studies have generally database. This database covers almost 40,000 institutions across
found a positive relationship between size and profitability (Yuan the globe and supplies specific information on Banks, including
et al. 2022; Saona 2016; Athanasoglou et al. 2006; Demirgüc-Kunt financials, corporate structure, and rating reports. In addition,
and Huizinga, 1999). Finally, another internal factor is liquidity macroeconomic data are used, which have been extracted from
since liquid assets, considered unprofitable investments, have been the World Development Indicators of the World Bank and the
associated with lower rates of return (Gemar et al. 2019). Bank of International Settlements.
Concerning the external factors of bank profitability, firstly, the To achieve the goal of conducting a broad-based international
economic development measured by the Gross Domestic Product study, we attempted to collect as much data as possible from the
(GDP) per capita stands out (Saona 2016). Some studies reported banks listed in the cited Orbis Bank Focus database. However,
a negative correlation between profitability and GDP growth due after comparing, cleaning the data, and selecting banks with more
to the high competition in periods of economic expansion (Ben than 5000 million euros total assets, we ended up with a sample
Ameur and Mhiri 2013; Ben Naceur and Omran 2011; Yanikkaya that includes 2091 banks (equivalent to approximately 8366
et al. 2018). So, the economic cycle fluctuations, measured by the observations). Still, the sampling error was less than 1%. Fig. 1
inflation and unemployment rates, have also been considered illustrates the allocation of nations to each of the regions con-
external indicators with a significant impact on the bank’s prof- sidered, and Table 1 reports the bank´s distribution in the sample
itability. During recessions, loan quality deteriorates, leading to among the areas of the world. The Far East and Central Asia,
lower profitability (Demirgüc-Kunt and Huizinga, 1999; Ben North America, and Western Europe are the regions with the
Naceur and Omran 2011). Likewise, economic growth can cause most weight within the sample.
an increase in the demand for loans, causing bank profitability to Regarding the methodology, this study follows the banking
improve (Bogdan and Roman 2015). profitability model proposed by Demirgüc-Kunt and Huizinga
Previous literature also points to interest rates significantly (1999), which uses Eq. (1) for the regression analysis, where Pijt is
impacting bank profitability. The increase in the interest rate the profitability of bank i in country j at time t, Bijt represents the

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Fig. 1 Sample countries’ regional distribution.

Table 2 Econometric variables.

Code Name Definition

Dependent variables
ROAE Return on Average Equity Net Income/Average Shareholders’ Equity (%)
ROAA Return on Average Assets Net Income/Average Total Assets (%)
Independent variables
a) Internal factors
LIS Listed in the stock exchange 1 if the bank is quoted, and 0 otherwise
TALN Total Assets Ln of Total Assets
NPL Non-performing loans Impaired loans/Gross loans & advances to customers (%)
RSKC Cost of risk Net impairment charges on loans & advances/Gross loans & advances to customers (%)
EFR Efficiency ratio Total operating expenses/Operating revenues (%)
NIM Net interest margin Net interest margin/Gross loans & advances to customers (%)
GRM Gross margin Operating revenues/Gross loans & advances to customers (%)
ETAR Equity to asset ratio Total Equity/Total Assets (%)
CLR Cash liabilities ratio Cash & balances with central banks /Total Liabilities (%)
CDP Customers’ depositsa Total customer Deposits (€)
CLO Customers’ loansa Total customer Loans (€)
CLOC Customers’ loans three largest banksa Total aggregated Loans of the three largest banks (€)
BCR Bank ranking Bank country rank by assets
b) External factors
INF Inflation The annual rate of consumer prices increase in a country (%)
UNEM Unemployment The labor force without a job in a country (% of the total labor force)
GPC GDP per capitaa Per capita gross domestic product in a country (€)
GDPG GDP growth Annual growth of the gross domestic product in a country (%)
CBIR Central Bank policy rate Annual policy rate of the Central Bank in a country (%)
DCPS Domestic credit to the private sector Domestic credit to the private sector in a country (% of GDP)
aDeflated according to the annual price index of each country.

internal variables of bank i in country j at time t, Xjt are the (2) were deleted.
external variables corresponding to country j at time t, and ℇijt is

Q1  3PQ ; Q3 þ 3PQ ð2Þ
the error term.
where Q1 is the quartile 1, Q3 is the quartile 3, and PQ represents
Pijt ¼ α0 þ αi Bijt þ Bj Xjt þ εijt the interquartile path.
ð1Þ
Second, the panel unit root test (Levin, Lin and Chu 2002) to
check if a common unit root was present in the variables.
We performed several processes and tests to check our Accepting the null hypothesis refers to the existence of a common
regression model´s robustness. First, the detection and filtering of unit root, while accepting the alternative hypothesis indicates the
outliers. To do this, the outliers beyond the interval expressed in absence of a common unit root. Third, we used the F and

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Hausman tests to identify our study´s best model (Yuan et al. Results
2022). The F test allowed us to select a model between pooled Panel data model diagnosis. The results of the data unit root test
models and fixed effect models. The Hausman test was used to panel appear in Table 3. All variables present a p-value < 0.05,
identify the best model between the fixed effect model and the indicating that the variables were free of a common unit root.
random effect model. Additionally, tests were also carried out on For their part, the results to support the selection of the
the assumptions of normality, linearity, homoscedasticity, and appropriate panel data regression model appear in Table 4. The F
autocorrelation of the error terms. To this end, the normal test indicated that the fixed effect model was chosen instead of the
probability plot and the scatterplot of standardized residuals pooled model since the null hypothesis was rejected in all cases
against the predicted standardized value met the assumptions of (p-value < 0.001). For its part, the results of the Hausman test
normality, linearity, and homoscedasticity of the error terms. The indicate that the null hypothesis was accepted (p-value > 0.05), so
Durbin-Watson test ensured the absence of autocorrelation in our we specified that the random effect model was the best to analyze
models. Finally, the variance inflation factor (VIF) values indi- the panel data of the present study.
cated the lack of multicollinearity.
On the other hand, this study selects the two most commonly
used dependent variables as a proxy for bank profitability. On the Descriptive statistics. Table 5 shows the main descriptive statistics
one hand, the return on average equity (ROAE), defined as the of the variables used in the research. Regarding the dependent
profit after taxes on equity, measures the return on capital. On the variables, the average Return on Average Equity (ROAE) of the
other hand, the return on average assets (ROAA) refers to the banks in the sample is 8.08%, with Africa being the region with the
profit after taxes on total assets. It indicates the profit obtained highest rate of profitability (17.20%) and Western Europe offering
per monetary unit of assets (Feng and Wang 2018). In addition, the lowest rate (5.44%). Likewise, the average value of Return on
and as possible profitability factors, a set of 19 variables selected Average Assets (ROAA) of the total sample amounts to 0.78%, with
from previous literature has been available (Al-Harbi 2019; Africa also registering the highest mean value (1.84%) and Western
Yanikkaya et al. 2018; Feng and Wang 2018). These independent Europe the lowest value (0.61%).
variables include internal factors of the entities (size, efficiency, On the other hand, the independent variables corresponding to
margin, and liquidity) and external factors on the macroeconomic the sample present a moderate dispersion at a global level.
situation of the countries (inflation, GDP, interest and unem- However, some have similar mean values in all regions, such as
ployment rates, and domestic credit). Table 2 details the defini- TALN, RSKC, and ETAR, with values of 17.03, 0.01, and 0.58,
tion of all the variables used in the investigation. respectively. Also, other variables present unequal mean values
between regions. For example, NPL has a mean value of 0.03
globally, but in Africa, the value is 0.06, while in North America
and Oceania, the average is 0.01. The net interest margin measured
Table 3 Panel data unit root test. by NIM registers a global average value of 0.19%, although, in
Western Europe, it amounts to 0.55%, and in Oceania, it is only
Variables t statistic p-value 0.02%. Other independent variables, such as CDR, CLO, and
Internal factors CLOC, also present a high dispersion in the sample. Finally, the
LIS −7.398 0.000 variables that refer to the regions’ macroeconomic conditions show
TALN −5.211 0.000 an inflation rate (INF) of 1.62% and an unemployment rate
NPL −12.587 0.000 (UNEM) of 4.32%. However, with significant differences between
RSKC −15.001 0.000 regions (for example, Africa has the highest mean values in INF
EFR −9.244 0.000 and UNEM while the Middle East has the lowest values). The
NIM −14.362 0.000 variables that refer to the GDP (GPC and GDPG), the Central bank
GRM −9.671 0.000
policy rate (CBIR), and the Domestic credit to the private sector
ETAR −11.917 0.000
CLR −8.663 0.000
(DCPS) also present significant differences between the regions.
CDP −9.810 0.000 Table 6 presents Pearson’s correlation coefficients of the
CLO −12.482 0.000 independent variables about dependent variables such as ROAE
CLOC −14.868 0.000 and ROAA used in this study. The matrix shows that there is no
BCR −7.560 0.000 general concern regarding multicollinearity because the indepen-
External factors dent variables do not have high correlations and the variance
INF −13,740 0.000 inflation factor (VIF) for all predictor variables is less than 5
UNEM −8.907 0.000 (Alharbi 2017).
GPC −6.398 0.000
GDPG −11.456 0.000
CBIR −7.003 0.000 Regression analysis. This section shows the results of the random
DCPS −8.219 0.000 effect regression models for the dependent variables ROAE and
ROAA. These results are presented globally, considering all the

Table 4 Results of the F-test and Hausman test.

WW A E F M N O S W
F-testa F 2.947 3.102 6.917 5.908 4.515 3.745 6.157 8.472 4.740
p-value 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000
Hausman testb Chi-square 7.921 8.395 3.813 1.589 7.962 1.821 9.525 3.831 5.402
p-value 0.518 0.673 0.481 0.389 0.671 0.475 0.351 0.850 0.672

WW Worldwide, A Africa, E Eastern Europe, F Far East and Central Asia, M Middle East, N North America, O Oceania, S South and Central America, W Western Europe.
aH = The pooled model is better than the fixed effect model; H = The fixed effect model is better than the pooled model.
0 1
bH = The random effect model is better than the fixed effect model; H = The fixed effect model is better than the random effect model.
0 1

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Table 5 Descriptive statistics.

Variables Mean Standard deviation

Dependent variables
ROAE WW 8.08, A 17.20, E 11.44, F 7.15, M 9.42, N 11.50, O 8.27, S 12.18, W WW 7.64, A 8.95, E 12.21, F 6.22, M 5.40, N 7.14, O 3.70, S 7.66,
5.44 W 7.47
ROAA WW 0.78, A 1.84, E 1.32, F 0.63, M 0.86, N 1.28, O 0.61, S 1.29, W WW 0.81, A 1.35, E 1.13, F 0.59, M 0.69, N 0.75, O 0.29, S 1.14, W
0.46 0.71
Independent variables
a) Internal factors
TALN WW 17.03, A 17.00, E 16.69, F 17.21, M 17.38, N 16.57, O 17.32, S WW 1.34, A 1.07, E 0.69, F 1.30, M 1.10, N 1.31, O 1.72, S 1.12, W
16.76, W 17.16 1.38
NPL WW 0.03, A 0.06, E 0.06, F 0.03, M 0.03, N 0.01, O 0.01, S 0.04, W WW 0.05, A 0.04, E 0.04, F 0.06, M 0.03, N 0.02, O 0.02, S
0.04 0.03, W 0.06
RSKC WW 0.01, A 0.01, E 0.01, F 0.01, M 0.01, N 0.00, O 0.00, S 0.02, W WW 0.10, A 0.01, E 0.01, F 0.01, M 0.01, N 0.01, O 0.00, S 0.03,
0.01 W 0.18
EFR WW 0.58, A 0.53, E 0.55, F 0.53, M 0.57, N 0.56, O 0.58, S 0.58, W WW 0.30, A 0.15, E 0.16, F 0.24, M 0.16, N 0.13, O 0.15, S 0.17, W
0.67 0.43
NIM WW 0.19, A 0.08, E 0.05, F 0.03, M 0.03, N 0.05, O 0.02, S 0.09, W WW 10.39, A 0.05, E 0.03, F 0.06, M 0.01, N 0.03, O 0.00, S 0.13,
0.55 W 19.32
GRM WW 0.45, A 0.12, E 0.08, F 0.06, M 0.05, N 0.03, O 0.03, S 0.24, W WW 26.32, A 0.07, E 0.05, F 0.22, M 0.01, N 0.00, O 0.00, S
1.38 0.69, W 48.94
ETAR WW 0.09, A 0.10, E 0.11, F 0.08, M 0.09, N 0.08, O 0.07, S 0.10, W WW 0.04, A 0.03, E 0.03, F 0.04, M 0.04, N 0.20, O 0.02, S
0.08 0.05, W 0.04
CLR WW 0.09, A 0.13, E 0.08, F 0.11, M 0.20, N 0.08, O 0.03, S 0.06, W WW 0.09, A 0.09, E 0.07, F 0.08, M 0.08, N 0.08, O 0.03, S
0.09 0.05, W 0.09
CDP WW 58715793.97, A 27214363.32, E 24014649.05, F 79754100.44, WW 206868067.78, A 25035255.81, E 45264868.82, F
M 44879136.29, N 51575892.08, O 90006689.35, S 17256247.37, 285934615.47, M 41451511.02, N 190586143.81, O 141031819.18, S
W 47207975.32 22874865.25, W 109516528.48
CLO WW 49199780.94, A 22790024.04, E 21781352.52, F 61274133.31, WW 156988827.71, A 22265775.71, E 45197334.28, F
M 36069484.79, N 32871727.42, O 106277214.16, S 18628320.10, 216518665.84, M 31937208.07, N 104478845.38, O
W 50794547.02 165788453.63, S 23744866.86, W 111579156.73
CLOC WW 2010631901.35, A 89942033.92, E 207464083.61, F WW 2114356885.22, A 60094838.04, E 198903986.14, F
3096188933.52, M238824445.06, N 2470488493.66, O 2872117858.22, M 41212268.01, N 114478473.33, O
1015774994.57, S 170946610.54, W 1044491975.02 422099236.47, S 79449169.96, W 688326361.81
BCR WW 67.95, A 4.23, E 7.20, F 65.14, M 5.57, N 165.56, O 8.92, S 8.84, WW 80.86, A 2.96, E 5.60, F 60.27, M 3.95, N104.28, O 6.20, S
W 33.99 6.79, W 35.66
b) External factors
INF WW 1.62, A 3.76, E 2.55, F 1.17, M 0.29, N 2.09, O 1.55, S 3.14, W 1.48 WW 2.14, A 4.12, E 1.90, F 1.39, M 0.71, N 1.73, O 1.21, S 2.34, W
2.82
UNEM WW 4.32, A 11.34, E 2.90, F 2.86, M 2.39, N 4.39, O 3.91, S 7.26, W WW 3.81, A 12.66, E 2.02, F 2.11, M 2.27, N 2.92, O 2.34, S 5.58, W
5.79 4.27
GPC WW 35161.99, A 4199.37, E 15349.27, F 19684.70, M 43732.49, N WW 23004.85, A 1948.11, E 4619.01, F 15352.85, M 3253.35, N
63925.97, O 50877.12, S 8827.15, W 43526.25 2386.33, O 6217.64, S 2811.98, W 18269.73
GDPG WW 1.09, A 0.62, E 1.14, F 1.79, M 1.78, N 1.28, O 1.54, S 0.80, W WW 4.44, A 2.91, E 3.59, F 4.19, M 3.59, N 3.40, O 1.53, S 5.36, W
0.03 5.24
CBIR WW 1.35, A 4.60, E 2.15, F 1.88, M 0.08, N 0.65, O 0.51, S 3.48, W WW 2.58, A 4.96, E 2.60, F 2.00, M 0.08, N 0.99, O 0.65, S 3.03,
0.63 W 3.33
DCPS WW 138.72, A 56.19, E 47.44, F 156.97, M 70.54, N 200.69, O WW 55.89, A 47.28, E 10.30, F 46.57, M 5.38, N 15.87, O 8.81, S
146.08, S 62,69, W 104.36 27.04, W 26.35

A Africa, E Eastern Europe, F Far East and Central Asia, M Middle East, N North America, O Oceania, S South and Central America, W Western Europe.

banks in the sample, and later, through an individual analysis by show that listed banks have the highest profitability worldwide,
world region. In turn, and following the proposal of Gazy et al. with fewer impaired loans and higher efficiency, gross margin,
(2022b), the estimated results are presented in two different and equity-to-assets ratio. Likewise, the most profitable banks are
models: model 1 includes only the banks´ internal variables, and found in the best-positioned countries in the ranking by assets,
model 2 adds external variables along with the banks’ internal with a macroeconomic environment characterized by higher
variables to see the joint impact of both factor types. inflation rates, lower levels of unemployment, and GPD per
At a global level, the regression results determine the existence capita, but with higher rates of GDP growth and interest rates.
of a variable set with a significant effect on the ROAE and ROAA Table 8 shows the regression results for ROAE in the different
(Table 7). This set comprises variables that positively affect regions. The validity tests confirmed that the models are robust. For
profitability (LIS, GRM, ETAR, BCR, INF, GDPG, and CBIR) and their part, the results indicate that particular variables significantly
those whose impact is negative (NPL, EFR, CLOC, UNEM, and affect profitability in practically all areas. Thus, RSKC and EFR are
GPC). In addition, the results also indicate that the variables significant in all regions. NPL is a prominent variable in all regions
TALN, RSKC, and DCPS are significant in explaining the ROAE except North America, ETAR except the Middle East and CLOC in
values but not for ROAA. Similarly, the variable CLR was a Oceania. Other variables are also crucial for a broad set of areas. For
determinant for ROAA, but it was not about ROAE. These results example, AIM for all regions except Africa, Oceania, and South and

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HUMANITIES AND SOCIAL SCIENCES COMMUNICATIONS | https://doi.org/10.1057/s41599-023-02545-6 ARTICLE

−0.193*
Table 7 Worldwide random effect regression models for

1.847
CBIR
ROAE and ROAA estimation.

1
0.336**
Dep.Var.: ROAE Dep. Var.: ROAA
GDPG

0.049
1.990
Model 1 Model 2 Model 1 Model 2

1
−0.452**
Constant 16.249*** 11.274*** 0.533** 0.312**

−0.081

0.411**
Internal factors

2.413
GPC

LIS 1.382*** 0.631*** 0.103*** 0.056**

−0.105 −0.002

1
TALN 0.316*** 0.011
−66.426*** −2.283*** −2.115***

−0.028

−0.116*
NPL 54.473***
UNEM

0.291*
0.027
−98.109*** −131.736*** −0.479 −1.208

3.351
RSKC
EFR −10.233*** −8.951*** −0.817*** −0.718***

1
NIM −4.230*** −4.260*** −0.010 −0.057

−0.145*
0.462**

0.530**
0.382**
−0.101
GRM 3.070*** 2.647*** 0.428*** 0.415***

2.154
INF

ETAR 10.955*** 9.509*** 8.152*** 7.861***

1

CLR −0.291 −0.455 0.303*** 0.231**

−0.000
−0.074
−0.035

−0.118*
0.336**
0.357**
0.005 CDP 0.000 0.000 0.000

1.092
CLO 0.000 −0.000 0.000 0.000
BRC

CLOC −0.001*** −0.001*** −0.002*** −0.001***

1

BCR 0.004** 0.014*** 0.001*** 0.001***

−0.175*
−0.084
0.334**

0.297**
−0.051

0.200*
0.159*

External factors
CLOC

3.037

INF – 0.435*** – 0.044***

1

UNEM – −0.161*** – −0.022***

−0.203*

GPC – −0.001*** – −0.001*

−0.046
−0.019
0.006

0.038
0.119*

– –
0.051
0.015

2.142

GDPG 0.172*** 0.018***

CLO

CBIR – 0.194*** – 0.019***

1

DCPS – −0.011*** – 0.000

−0.040
−0.005
0.469**

−0.016
−0.183

Models’ analysis
0.050

0.063
0.018
0.124

1.964
CDP

F 89.002*** 92.123*** 151.987*** 127.881***

1

R2 20.13% 27.63% 29.63% 34.14%

Adj. R2
−0.044
0.029**

19.91% 27.33% 29.43% 33.87%

−0.027

−0.032
−0.018

−0.017
0.053

2.078
0.001
0.016

0.013

RMSE 6.24 5.94 0.66 0.64

CLR

MAPE 108.44% 93.30% 106.58% 97.68%

1

AIC 6.50 6.41 2.11 1.95

−0.127*

−0.046
−0.089
−0.076
−0.075

−0.023

BIC 6.52 6.44 2.03 1.98

0.074

0.065
0.093

0.036
ETAR

0.107

2.179
1

*** Sig. at 0.01; ** Sig. at 0.05; * Sig. at 0.10.

−0.004
−0.005

−0.005
−0.012
−0.011

−0.011
0.005
0.003

0.003

0.003
0.028

3.898
0.016
GRM

Central America; AGM for all except North America and South
1

and Central America; and INF in all regions except Middle East,
−0.004
−0.005

−0.005
0.372**

−0.014
−0.011

−0.011
0.002

0.005
0.003

0.003
0.027

Oceania, and Western Europe.

0.016

1.590
NIM

Unlike the previous variables that have substantially impacted

1

ROAE for various regions, some variables have been significant in

−0.233**

−0.160*
−0.135*

−0.173*

only one or two regions. For example, BCR is only substantial for
−0.066

−0.088
−0.059

−0.085

0.154*
0.005
0.007

2.974
0.091

0.013
0.011

Western European banks, and UNEM is only significant for

* Correlation is significant at the 0.05 level; ** Correlation is significant at the 0.01 level.
EFR

South and Central America. Furthermore, TALN has a negative

1

effect on North America and Western Europe; CLO is only in

−0.004
−0.006
−0.003

−0.003
−0.029
0.492**
0.493**

−0.027

−0.022
−0.014

0.040
0.006

0.023
RSKC

3.350
0.014
0.012

Africa and South and Central America, and GDPG is only in

South and Central America and Western Europe. Therefore, from
1

the comparison between regions, it can be deduced that for each

Table 6 Pearson correlation matrix and VIF.

−0.291**
−0.180*
−0.174*
−0.159*

−0.027
0.281**
0.281**

region, there is single variables’ set that determines the ROAE

0.307*

0.044
0.048

0.078
0.039
0.057

0.022

2.078
0.019
0.016
NPL

levels and that these regional differences improve the estimation

1

of the global model in most cases since the goodness of the

regression fit shown in Table 7 is higher for the regional models
−0.328**
−0.224*
−0.096

−0.097
0.389**
0.224**
−0.023

−0.019
−0.019
−0.015

−0.015
0.099

0.045

0.082
0.053

0.023

compared to the global ones.

TALN

0.014
1.203

The random effect regression results for ROAA in the different

1

regions appear in Table 9. In this case, all the models built also
−0.260*

−0.006

present an acceptable fit. The results confirm that the variables

−0.048
−0.096

0.474**
−0.036

−0.036
−0.027

0.277**
−0.012

0.218**

−0.011

−0.011
0.081*

0.190*
ROAA

0.034
0.033
0.041

1.907

affecting ROAA in practically all regions are NPL, RSKC, EFR,

VIF Variance inflation factor.
1

ETAR, and CLOC. Likewise, and as for ROAE, other variables are
−0.401**

also significant for a broad set of regions, such as the case of GRM,
−0.293*
−0.004

−0.024
−0.038
0.856**

−0.032

0.216**
0.311**
0.146*

0.193*
0.049
ROAE

0.034
0.036

which was significant in all regions except the Middle East and
0.035
0.019

0.021
0.021

0.031

1.492

North America. However, certain variables of particular signifi-

1

cance in determining the ROAE levels of most regions have not

UNEM
ROAA

GDPG
ROAE

CLOC
TALN

DCPS
RSKC

ETAR

been so for the ROAA model. These variables are NIM (with
GRM

CBIR
CDP
NIM

GPC
CLO

BRC
NPL

CLR
EFR

INF

VIF

significance only in the Far East and Central Asia, North America,

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Table 8 Random effect regression models for ROAE by world region.

A E F M N O S W

Model 1 Model 2 Model 1 Model 2 Model 1 Model 2 Model 1 Model 2 Model 1 Model 2 Model 1 Model 2 Model 1 Model 2 Model 1 Model 2
ARTICLE

Constant 44.346*** 43.068*** 74.723*** 52.793** 27.734*** 21.245*** 23.097 10.715*** 38.852*** 45.395*** 22.126*** 22.226*** 50.393*** 39.246** 21.607*** 22.029***
Internal factors
LIS −0.435 0.387 0.487 0.384 0.960*** 0.884*** 1.917 0.958 −0.581 −0.658 −0.316 −0.280 2.882*** 3.107*** 1.596*** 1.339***
TALN n/a n/a −2.484** −0.477 −0.396*** 0.040 −0.095 n/a −1.246*** −0.839** n/a n/a −1.060 −0.106 −0.607*** −0.737***
NPL −65.926*** −62.053*** −12.387 −23.855* −35.846*** −39.557*** −129.424*** −143.03*** −10.247 −11.351 −38.772* −42.589* −77.306*** −66.733*** −36.512*** −27.598***
RSKC −369.017*** −341.112*** −396.865*** −383.954*** −461.795*** −470.837*** −325.448*** −192.063 −275.555*** −211.110*** −834.499*** −855.363*** −185.974*** −173.31*** −292.838*** −374.615***
EFR −39.298*** −37.703*** −45.921*** −45.947*** −21.757*** −20.108*** −34.157*** −30.446 −18.174*** −18.089*** −23.319*** −23.547*** −35.699*** −34.337*** −3.109*** −2.612***
NIM −34.330 −39.313 −91.123** −103.342** 65.442*** 71.563*** 211.047 179.146* 24.429*** 19.974*** −138.106 −150.891 5.203 3.673 −22.193*** −27.888***
GRM 118.760*** 120.572*** 164.727*** 160.303*** 118.297*** 97.341*** 59.030 30.555* −1.124 −0.874 324.930*** 334.582*** 2.066 0.868 12.211*** 13.905***
ETAR −98.189** −96.428*** −15.011 −27.055* −58.100*** −55.820*** −32.751 −41.724 −61.574*** −66.003*** −59.117*** −57.701*** −27.553*** −47.657*** −10.500** −12.881***
CLR −2.357 −0.127 5.720 −1.007 0.725 1.888* −5.319 0.276 −3.409* −0.056 −11.582** −12.564** 16.608*** 14.284** −5.574** −5.695***
CDP 0.002*** −0.001*** n/a n/a n/a n/a −0.002 −0.001 0.001*** 0.003* 0.001 0.001 −0.002*** 0.003*** 0.001 0.001
CLO 0.003*** 0.001*** 0.002 0.001 0.001 0.002 n/a n/a n/a n/a n/a n/a 0.001*** −0.003* 0.001 0.002
CLOC 0.004*** −0.003*** 0.001** 0.001 −0.002*** 0.003*** 0.003* n/a 0.004*** 0.003*** −0.001 −0.001 0.003*** 0.002*** −0.002*** −0.001
BCR 0.430 0.407 −0.546*** −0.000 −0.007*** 0.001 −0.185 −0.322 −0.006* −0.002 0.034 0.036 −0.084 0.046 −0.013* −0.016**
External factors
INF – −0.328** – −0.796* – −0.162* – 2.761 – 0.216** – −0.002 – −0.601* – 0.215
UNEM – 0.035 – 0.207 – −0.097 – n/a – n/a – 0.027 – −0.194** – −0.063
GPC – n/a – −0.000 – −0.007*** – 0.000 – n/a – n/a – −0.000 – −0.000*
GDPG – 0.325 – −0.080 – 0.040 – n/a – n/a – n/a – 0.247*** – 0.159***
CBIR – n/a – 0.580* – 0.176* – −12.739 – n/a – −0.103 – 0.408* – 0.468***
DCPS – n/a – −0.180** – 0.002 – 0.388* – −0.071*** – n/a – −0.037 - 0.018**
Models’ analysis
F 57.587*** 24.681*** 41.164*** 29.621*** 407.709*** 293.710*** 12.469*** 11.552*** 52.117*** 50.368*** 113.465*** 86.215*** 35.282*** 35.946*** 22.261*** 25.665***
White 0.521 0.422 7.853*** 1.680 66.782*** 36.353*** 3.402*** 4.661*** 0.710 0.614 3.070*** 3.000*** 1.760*** 0.870 9.670*** 5.520***
test
R2 92.98% 94.39% 73.18% 75.29% 73.90% 75.43% 80.60% 82.63% 42.56% 45.57% 93.86% 93.86% 71.37% 79.33% 18.67% 27.98%
Adj. R2 89.61% 90.57% 71.41% 72.74% 72.72% 75.17% 74.14% 75.48% 41.76% 44.67% 93.00% 92.77% 9.35% 77.12% 17.83% 26.89%
RMSE 2.13 1.91 5.27 5.06 2.92 2.84 2.35 2.23 4.16 4.05 0.91 0.91 3.99 3.39 5.80 5.50
MAPE 15.54% 13.87% 69.74% 72.21% 45.72% 46.13% 19.21% 17.01% 32.91% 28.04% 9.59% 9.73% 36.91% 31.44% 124.30% 103.82%
AIC 5.60 4.94 6.52 6.28 5.00 4.95 5.08 5.05 5.72 5.67 2.91 2.97 5.75 5.48 6.39 6.26
BIC 5.24 5.66 6.38 6.60 5.04 5.00 5.58 5.63 5.79 5.76 3.26 3.38 5.98 5.82 6.45 6.36

Standard errors are given in parentheses.

n/a non-available, A Africa, E Eastern Europe, F Far East and Central Asia, M Middle East, N North America, O Oceania, S South and Central America, W Western Europe, RMSE Root Mean Square Error, MAPE Mean Absolute Percentage Error, AIC Akaike Information Criteria, BIC
Bayesian Information Criteria.
*** Sig. at 0.01; ** Sig. at 0.05; * Sig. at 0.10.

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and Western Europe) and INF (important in North America and ROAA, but not ROAE. Ercegovac et al. (2020) also obtained
Western Europe). On the other hand, the variables that had been different factors for ROAE and ROAA with a sample of European
significant for the ROAE model only in one or two regions followed banks. Likewise, Le and Ngo (2020) confirmed a positive rela-
the same behavior in the ROAA model (for example, BCR, UNEM, tionship between capital market development and bank profit-
TALN, and GDPG). These results also confirm that a single set of ability, which may be consistent with our findings on the
explanatory variables determines bank profitability for each region. significance of the DCPS variable.
From a regional perspective, our models for the Far East and
Central Asia region further confirm that the cost of risk (RSKC),
Discussion the aggregate total loans of the three largest banks (CLOC), and
At a global level, our results point to a set of five internal factors that the interest margin (NIM) are also relevant factors. These results
are statistically significant in explaining bank profitability. These have partially coincided with those obtained by Almaqtari et al.
factors refer to listed banks (LIS), non-performing loans (NPL), (2019) since, in their study on banks in India and Pakistan, they
efficiency (EFR), gross margin (GRM), and capitalization (ETAR). pointed out that only size, operational efficiency, the level of
Likewise, other external factors have been significant in our global capitalization, and the inflation rate are the factors that most
models, indicating that the most profitable banks are located in the affect profitability. However, our model adds new explanatory
countries best positioned in the ranking by assets (BCR), with a variables. For Europe, the study by Ercegovac et al. (2020) con-
macroeconomic environment characterized by higher inflation rates cluded that banks with the best risk profile and greater efficiency
(INF), lower levels of unemployment (UNEM) and GDP per capita are also the most profitable. Our results also confirm that the cost
(GPC), but with higher GDP growth rates (DGPG) and higher of risk (RSKC) and efficiency ratio (EFR) are significant internal
interest rates (CBIR). Some of these factors have already been factors that explain the ROAE and ROAA levels of Eastern and
identified in previous global studies. For example, Ho et al. (2023) Western European banks. Even so, our models provide new
confirmed the significance of operational efficiency, the level of explanatory variables specific to Europe, including the gross
capitalization, and the growth of the DGP on bank profitability margin (GRM) and capitalization (ETAR). Finally, for the North
using a sample of entities belonging to 90 countries. American region, our results coincide with those of Feng and
The variable referring to non-performing loans (NLP) has been Wang (2018), who pointed out efficiency (EFR) as one of the
significant in the global models for ROAE and ROAA and all essential factors of bank profitability. However, our models detect
regional models except for North America and Eastern Europe. other variables that are also essential for bank profitability in the
These results highlight the importance of non-performing loans as region, such as the net interest margin (NIM), the negative effect
an internal profitability factor, which aligns with Kosmidou et al. of the size of the entities (TALN), capitalization (ETAR), the
(2005). However, they differ from those obtained by Kozak (2021), ranking of banks by assets (BCR) and the DGP growth (DGPG).
who found a significant effect of NPL in banks in Eastern European
countries. Possibly, the greater resilience to the increase in loan
deterioration in some regions is due, among other things, to the Conclusions and implications
benefits of scale economies (Kozak 2021). For example, North Banks are part of a financial system by performing the inter-
America is characterized by a high position in the bank country rank mediation function and collaborating in implementing monetary
by assets (BCR) and does not show a particular sensitivity to NPL. policy. In an increasingly globalized environment, understanding
The results obtained on the importance of bank capitalization the different aspects of banking profitability at a global level is
measured by ETAR indicate that it is significant globally for essential for the financial stability of countries. This study adds to
ROAE and ROAA, and also by region (except the Middle East for the empirical literature on bank profitability by analyzing the
ROAE). The latter may be because banks with a high capital ratio global and regional levels.
can take advantage of new business opportunities, achieving From a global perspective, the results reveal that certain
greater profitability (Al-Harbi 2019). Our results are consistent internal and external factors explain bank profitability. The listed
with the findings of Yuan et al. (2022) for commercial banks in bank (LIS), the incidence of impaired loans (NPL), efficiency
South Asian countries. They also detect bank capitalization´s (EFR), gross margin (GRM), capitalization (ETAR), and the
positive and significant effect on ROAE and ROAA. However, position of the countries in the ranking by assets (BCR) are the
our results differ from those obtained by Saona (2016), who main internal factors. And among the external factors stand out
found a negative relationship between profitability and capital inflation rate (INF), unemployment (UNEM), GDP growth
ratio due to the assumption of lower risks. And with those of Le (DGPG), and interest rate (CBIR).
et al. (2022), referring to the negative influence of bank capita- From a regional perspective, certain variables significantly
lization on the profitability of Islamic banking systems. affect profitability in practically all regions, such as the cost
On the other hand, the variables that refer to total customer derived from impairment charges on loans (RSKC) and efficiency
deposits (CDP) and total customer loans (CLO) have never been (EFR). And other variables are also significant in all regions with
significant in our global models. However, at the regional level, the some exceptions, such as non-performing loans (NPL), which is
CDP was significant, with a negative impact in Africa and a positive not significant in North America, the level of capitalization
impact in North, South and Central America. These results only measured by the equity to asset ratio (ETAR), which is not in the
partially coincide with the studies of Chirwa (2003), Saona (2016), Middle East, and total aggregated loans of the three largest banks
and Menicucci and Paolucci (2016), which indicated that deposits (CLOC), which was not significant in Oceania. However, some
could positively affect profitability. Our results are also in line with variables have been relevant only in one or two regions, such as
those obtained by Akbas (2012) and Tariq et al. (2014) by showing the case of the bank country rank by assets (BCR), unemploy-
that, in some regions, customer deposits (CDP) hurt profitability. ment (UNEM), size (TALN), total customer loans (CLO), and the
And also in line with the studies of Demirgüc-Kunt and Huizinga growth of DGP (GDPG). Therefore, these results have allowed us
(1999) and Soyemi et al. (2013) by detecting an insignificant rela- to know the unique variables that determine bank profitability in
tionship between deposits and profitability in certain regions. each region with robustness. Also, the regional models improve
Added to the above, our results indicate that the TALN, RSKC, the estimation of the global models in most cases.
and DCPS variables significantly explain the ROAE values but not Our research has important theoretical and professional
for the ROAA. Similarly, the CLR variable was significant for implications in bank profitability. From a theoretical perspective,

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10
Table 9 Random effect regression models for ROAA by world region.

A E F M N O S W

Model 1 Model 2 Model 1 Model 2 Model 1 Model 2 Model 1 Model 2 Model 1 Model 2 Model 1 Model 2 Model 1 Model 2 Model 1 Model 2
ARTICLE

Constant 0.314 −0.189 6.157*** 5.037*** 1.357*** 1.002*** −0.391 0.373 −0.251 1.351 1.061*** 1.075*** 6.164*** 5.223** 1.435*** 1.427***
Internal factors
LIS 0.118 −0.027 −0.095 −0.136 0.132*** 0.111*** −0.141 −0.121 0.117 0.117 −0.040 −0.039 0.311*** 0.363*** 0.207*** 0.182***
TALN n/a n/a −0.287*** −0.168 −0.016 0.023** 0.095 n/a −0.068 −0.045 n/a n/a −0.259** −0.180 −0.062*** −0.069***
NPL −7.183** −8.332** −0.754 −1.436 −2.408*** −2.787*** −10.953*** −14.296*** 2.707** 2.831** −1.208** −1.385** −6.049*** −5.643*** −1.553*** −0.784**
RSKC −39.640*** −40.933*** −20.41*** −15.935*** −31.741*** −34.016*** −12.758 −6.475 −3.135 0.027 −66.671*** −69.018*** −8.761*** −7.788*** −12.290*** −18.644***
EFR −2.739*** −1.639* −2.523*** −2.509*** −1.672*** −1.583*** −2.924*** −2.57*** −2.098*** −2.103*** −1.614*** −1.653*** −3.218*** −3.101*** −0.269*** −0.228***
NIM 0.030 −3.340 −2.065 −3.012 13.488*** 11.325*** 9.285 11.003 6.245*** 5.569*** −6.547 −9.087 0.603** 0.363 −0.693*** −0.641***
GRM 12.429*** 16.803*** 11.964*** 11.507*** 0.308 0.726*** 9.883 5.694 0.077 0.100 24.561*** 26.597*** 0.456*** 0.487*** 2.369*** 2.152***
ETAR 17.384*** 18.088*** 6.310*** 6.289*** 3.695*** 3.496*** 9.227*** 6.935* 3.083*** 2.852*** 1.954** 2.144*** 6.731*** 4.923*** 4.947*** 4.989***
CLR −1.008 −2.378 0.483 −0.089 0.420*** 0.469*** 0.383 0.607 −0.088 0.063 −1.337*** −1.582*** 0.998 0.705 −0.366** −0.331*
CDP −0.002** 0.001 n/a n/a n/a n/a −0.001 −0.002 0.001 0.001 n/a 0.002 0.003*** 0.003*** 0.001 0.002
CLO 0.003*** n/a 0.004*** 0.002** 0.001 −0.002 n/a n/a n/a n/a 0.001 n/a −0.003* −0.004** 0.002 0.001
CLOC −0.002* 0.001 0.003*** 0.001 −0.002*** −0.004*** 0.001 n/a 0.003*** 0.002*** −0.002* −0.004** 0.003*** 0.003*** −0.004*** −0.001
BCR 0.079** 0.047 −0.053*** −0.033* 0.002** 0.002* −0.027 −0.043 0.000 0.000 −0.001 −0.000 −0.024 −0.010 −0.002*** −0.003***
External factors
INF n/a −0.007 −0.014 0.244 0.064*** 0.004 −0.036 0.046***
UNEM 0.005 −0.058 −0.010 n/a n/a 0.003 −0.024** −0.017***
GPC n/a −0.000 −0.004*** −0.000 n/a n/a 0.000 −0.004***
GDPG −0.001 0.019 0.001 n/a n/a n/a 0.026*** 0.009**
CBIR −0.020 0.055* 0.021** −1.213 n/a −0.021 0.016 0.015
DCPS n/a −0.008 −0.001*** 0.042 −0.008*** n/a −0.004 0.002***
Models’ analysis
F 53.990*** 29.69*** 37.723*** 27.141*** 342.87*** 250.804*** 16.501*** 14.502*** 28.833*** 28.202*** 114.108*** 88.604*** 27.885*** 24.766*** 39.251*** 40.367***
White test 1.460 1.650 3.520*** 1.200 36.590*** 23.891*** 3.172*** 4.031*** 3.687*** 3.344*** 4.396*** 2.492*** 2.603*** 5.559*** 13.732*** 9.434***
R2 95.15% 93.06% 70.77% 72.97% 69.70% 71.69% 84.62% 85.66% 27.72% 30.50% 93.73% 93.87% 63.10% 69.55% 27.58% 36.51%
Adj. R2 93.39% 89.96% 68.89% 70.28% 69.49% 71.4% 79.49% 79.75% 26.76% 29.41% 92.91% 92.81% 60.84% 66.74% 26.88% 35.60%
RMSE 0.29 0.35 0.49 0.47 0.32 0.31 0.27 0.26 0.64 0.62 0.07 0.07 0.54 0.49 0.52 0.49
MAPE 15.98% 19.50% 69.64% 68.53% 58.49% 57.81% 27.98% 23.68% 44.09% 40.99% 10.41% 10.64% 56.55% 50.41% 119.02% 102.94%
AIC 0.96 1.41 1.53 1.52 0.56 0.50 0.74 0.75 1.96 1.93 −2.18 −2.14 1.71 1.58 1.56 1.44
BIC 1.48 2.00 1.75 1.83 0.61 0.56 1.24 1.33 2.03 2.00 −1.86 −1.74 1.93 1.88 1.61 1.51

Standard errors are given in parentheses.

n/a non-available, A Africa, E Eastern Europe, F Far East and Central Asia, M Middle East, N North America, O Oceania, S South and Central America, W Western Europe, RMSE Root Mean Square Error, MAPE Mean Absolute Percentage Error, AIC Akaike Information Criteria,
BIC Bayesian Information Criteria.
*** Sig. at 0.01; ** Sig. at 0.05; * Sig. at 0.10.

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our results help to understand the formation process of bank current study, and so are not publicly available. Data are however
profitability, offering global and specific models for each region. available from the authors upon reasonable request and with
Furthermore, our study contributes to the existing academic lit- permission of Orbis Bank Focus by Moody´s.
erature by providing international empirical evidence from an
extensive database on the factors driving bank profitability, cov- Received: 26 February 2023; Accepted: 18 December 2023;
ering the 2018–2021 period and 110 countries in significant
regions worldwide. Most global studies related to the banking
sector´s profitability stopped in 2016 or have considered a max-
imum of 90 countries. Likewise, our evidence explains how the
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