Determinants of Moroccan banks profitability

Abstract

Profitability has become a prime objective for every company, and since the bank is considered a form of enterprise, it aims to generate profits through its activities, either in the form of interest when granting loans at a higher rate than that applied to other customers' deposits, or in the form of commissions on transfers, securities management or the purchase and sale of foreign currency, or in the form of dividends from its investments, All these and other banking activities are under the supervision of the BAM (Bank Al-Maghrib), which aims to safeguard the interests of customers in all banking establishments, as well as ensuring the stability of the Moroccan financial system via management and accounting rules, and the requirement of financial ratios such as solvency and liquidity ratios to ensure financial transparency and banking risk management.

Like all companies, a credit institution's profitability represents its ability to generate sufficient profits to pursue and develop its business in the long term. The aim of this paper is to analyze the profitability of banks operating in Morocco, based on an empirical study of a sample of five banks, through an econometric study in which we will discover the effect of each factor in determining the profitability of Moroccan banks.

The econometric study, based on data from five Moroccan banks over the period from 2006 to 2017, i.e. 60 observations, shows the existence of positive correlations between bank profitability and the following indicators: overheads, equity ratios and bank size. On the other hand, no positive relationship between profitability and liquidity was identified for the banks in our sample during the period studied.

Key words: profitability, banking, econometrics, Morocco.

JEL Classification: C33

Paper type: Empirical research