The impact of Bank Specific and Macroeconomic Indicators on the Profitability of Commercial banks

Abstract

This study has been carried out with the aim to investigate the impact of the bank specific variables: Asset size, Credit Risk , Total deposits to total assets ratio, and macroeconomic indicator : interest rate( Discount rate) on the profitability measures, ROE and ROA of commercial banks in Pakistan during the period of 2006-2010.. There are two measures of profitability Return on equity (ROE) & Return on assets (ROA). All 32 commercial banks were selected and by using regression the results show that there is a significant impact of bank specific variables( asset size, total deposits to total assets, credit risk )and macroeconomic indicator (interest rate) on ROE and credit risk and interest rate have also a significant impact on ROA.