The determinants of bank profitability
: evidence from Portugal

  • Pedro Rúben Gonçalves Nunes (Student)

Student thesis: Master's Thesis


The present dissertation aims to study key factors that determine the profitability of Portuguese Banks. We use public data from Associação Portuguesa de Bancos (APB) between the first semester of 2010 to the last semester of 2019. Moreover, we split the sample into banks under intervention (acquisition, merger and/or bankruptcy) and sound banks to analyze the behavior of different variables when we regress in each model. Following Arellano and Bover (1995) and Blundell and Bond (1998), we employ a dynamic model specification, known as the Generalized Method of Moments, which controls for profit persistence. As the main measure of bank profitability, we use return on average assets (ROAA). This researchs' findings suggest that good efficiency, higher revenue diversification, higher capitalization, and a larger proportion of deposits positively impact Portuguese banks' profitability. Loan loss provisions only have a significant negative impact on profitability measure ROAA when we regress with banks under intervention. Also, during this period, we provide evidence of a negative relationship between size and profitability when we regress with return on average equity (ROAE). Finally, our study does not show any clear relationship between macroeconomic factors and the Portuguese banks' profitability.
Date of Award25 Jan 2021
Original languageEnglish
Awarding Institution
  • Universidade Católica Portuguesa
SupervisorEva Schliephake (Supervisor)


  • Bank profitability
  • Bank-specific factors
  • Macroeconomic factors


  • Mestrado em Finanças

Cite this