Factors Affecting the Profitability of Banks

highlighted the role of well-functioning financial systems in investing in different sectors of the economy. The financial systems facilitate the economic growth by aggregating the limited resources for enormous investments. Considering the important role of banks in financial systems and the significant impact of the Profitability of Banks on their activities, this paper empirically analyses the factors determining the profitability of 15 banks for the period of 1384 – 1393. It should be noted that the higher levels of profitability in banks not only enables them to grant further credit, but also facilitates the investment process in risky environments. According to the literature, we divided the factors into two groups: bank specific factors and macroeconomic factors. The results of examining hypothesis using panel analyses and Eviews software and the return on equity (ROE) as the profitability measure, indicate that there is a positive relationship between the profitability factors and the asset structure, revenue diversification, economic growth and inflation. In addition, capitalization, capital structure, size, industry concentration and interest rate have a negative effect on bank profitability.