Factors influencing the Bank’s performance: Comparative study between fourth generation and top banks of Bangladesh

Urmi Das, Renhuma Hoque Moutushi, Nuzat Nawar Tofa




Purpose: To explore the influence of bank-specific accounting variables on the profitability of commercial banks and to investigate some significant differences in Bangladesh’s fourth generation banks and top banks during the period 2013-2018.


Methodology: This study used an Ordinary least square (OLS) regression model. Return on asset (ROA) and Return on equity (ROE) were regressed interchangeably with the independent variables: Non-performing loan (NPL), cost to income ratio, loan to deposit ratio, cost of fund, capital adequacy ratio, debt to equity ratio, and market size. For this purpose, regression variables for the year 2013-2018 were collected from the financial statements of the sample banks, Bangladesh Bank website, Dhaka stock exchange website, and Lanka Bangla Financial portal.


Findings: The result indicates that, among the explanatory variables considered, the cost of fund has a significant positive relationship and cost to income, debt to equity ratio have a significant negative association with the fourth generation bank’s ROA. ROA of top banks also shows a significant positive relationship with the cost of fund and a negative relationship with only the debt to equity ratio. On the other hand, the ROE of the fourth generation banks is positively impacted by loan to deposit ratio and negatively by cost to income ratio. Conversely, ROE of top banks has a significant positive relationship with the cost of fund and a significant negative relationship with NPL and cost of fund at a 5% significance level.

Originality: The results of this study provide policymakers and regulators with valuable guidance on the effect of fundamental accounting variables on the profitability of a bank. It will be helpful for further policymaking and regulations.


Keywords: Bank’s profitability, Loans, Size, Capital, Cost


Article Classification: Research Paper


JEL Classification Codes: G20, G21, G32



Full Text:



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