Determinants of Banking Sector Profitability: Empirical Evidence from Palestine; 1995-2015

The objective of this study is to examine the relationship between bank specific and main macroeconomic characteristics over bank profitability by using data of banks taken from the consolidated balance sheet of banking sector as a whole in Palestine, over the period 1995-2015. This paper uses the Ordinary Least Square method to investigate the effect of assets, capital, loans, deposits, economic growth and inflation on major profitability indicators i.e., return on assets (ROA), return on equity (ROE) and net interest margin (NIM), separately. The empirical results have found strong evidence that internal factors have an influence on the profitability and external factors of inflation and GDP per capita of factors affect the profitability with the expected effect. These results are of value to both academics and policy makers