Short-term determinants of banking profitability and financial sustainability of banks in Bangladesh: An empirical study of COVID-19 effects

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Abstract

The purpose of this study is to examine the profitability and financial sustainability of banks in Bangladesh before and during COVID-19. The study compares the profitability and financial sustainability of 23 listed private commercial banks. The data for short-term periods before the COVID-19 and during the COVID-19 crisis we used. Financial ratios, descriptive statistics, correlation matrix and linear regression model estimations are used for the analysis of data. The mean values of ROA, ROE and NIM are found before the COVID-19 crisis as 0.0019, 0.0270 and 0.0054, and during the COVID-19 as 0.00128, 0.01856 and 0.00321 respectively. On the other hand, the mean values of NFLR, CCR, ICR, and OSR are found before COVID-19 as 2.0936, 6.852, 0.9314 and 0.4751, and during COVID-19 as -2.5961, 5.879, 0.7673 and 0.3587 respectively. The findings construe a significant impact of the unprecedented pandemic. Within a short period of time, sample banks’ profitability and financial sustainability deteriorated significantly. A key implication of our study is that the private-sector commercial banks in Bangladesh experienced severe financial difficulties during COVID-19 which impacted their profitability and financial sustainability. The findings of the study suggest that adverse economic events have substantial effects on the financial realities of financial institutions. The findings of the study are expected to be useful to both academics and policymakers.

Keywords: Financial Sustainability, Banks, Bangladesh, Effect, Profitability

Authors’ individual contribution: Conceptualization — F.B.; Methodology — F.B. and N.O.; Software — F.B.; Validation — S.A.S.; Formal Analysis — F.B.; Investigation — F.B.; Resources — F.B., S.A.S., and M.K.R.; Data Curation — S.A.S. and B.B.S.; Writing — Original Draft — F.B. and S.A.S.; Visualization — K.S.I., M.K.R., and B.B.S.; Supervision — F.B., K.S.I., and N.O.; Funding Acquisition — B.B.S.

Declaration of conflicting interests: The Authors declare that there is no conflict of interest.

JEL Classification: E58, G21, G32, M14

Received: 16.02.2023
Accepted: 21.04.2023
Published online: 24.04.2023

How to cite this paper: Begum, F., Islam, K. S., Saroni, S. A., Rahman, M. K., Sarker, B. B., & Omar, N. (2023). Short-term determinants of banking profitability and financial sustainability of banks in Bangladesh: An empirical study of COVID-19 effects. Corporate Ownership & Control, 20(3), 61–74. https://doi.org/10.22495/cocv20i3art4