BANK PROFITABILITY DETERMINANTS: EVIDENCE FROM KOSOVO AND ALBANIA

Abstract

This research aims to examine the factors that impact the profitability of commercial banks in Kosovo and Albania. Profitability is crucial in the financial sector as it directly affects policymakers, regulators, and bank management. The study focuses on several determinants of bank profitability, including the number of employees, loan interest rate, non-performing loans, and total loans. The study employed quarterly secondary data spanning from 2010 to 2020, resulting in 400 observations. The analysis used multiple linear regression, influenced by the huge number of observations and the applicability of ordinary least squares (OLS) for such studies. This method allowed for a thorough examination of the interactions between the dependent and independent variables, providing a more in-depth understanding of the factors driving bank profitability. The statistical significance was determined using software such as STATA and SPSS. The dependent variables in the analysis are return on assets (ROA) and return on equity (ROE). The findings reveal that the loan interest rate, total loans, and non-performing loans significantly influence the profitability of the analyzed banks in Albania and Kosovo. Furthermore, the total number of loans and employees are statistically significant determinants of ROE. These findings provide valuable insights for bank management and policymakers in enhancing bank profitability and stability.