Impact of External & Internal Factors on Profitability & Net Worth of Commercial Banks in Lebanon
Authors:   , Kouyoumjian Christapor Avedis 
Published: June 2024

The aim of this research is to study and analyze the external and internal factors effect on the profitability and net worth of the commercial banks in Lebanon. Treasury bill of 12 months is chosen to represents the market interest rates. The external factors which are chosen in this research study consist of several aspects such as inflation, money supply, growth in coincident indicator and interest rates variability. The Internal factors which are chosen in this research study consist of several aspects such as growth of the bank’s assets, profitability, efficiency, capital adequacy, liquidity, market share, competition, loan to deposit ratio and non-performing loans. This study uses a joint Mathematical Models used by the following researches to test the impact of interest rate fluctuation and external and internal factors on short and long run Profitability of commercial banks. (Godspower, 2012) and (Raharjo, 2014) (Flannery, 1981, 1983) The study applied regression analysis using HAC and Robust least square Huber Type 1, 2 and 3 tests for a data that covers 11 years period from 2003 till 2013. The internal variables that have significant impact on NIM are Capital adequacy ratio, Liquidity, Loan to deposit ratio, competition, market share, operating efficiency, growth in assets and return on assets, and the external factors are Interest rates, Money supply and interest rates variability. Concerning NW, the internal variables that have significant impact on it are Loan to deposit ratio, competition, Market share, return on assets and operating efficiency. The external variables that have significant impact on NW are Interest rates, Money supply and interest rates variability. For large banks the internal variables that have significant impact on NIM are operating efficiency, return on asset, and growth in assets. The external variables that have significant impact on NIM in large banks are Interest rates, money supply and interest rates variability. Concerning NW of large banks the internal variables that have significant impact are Loan to deposit ratio, liquidity, operating efficiency, market share, return on assets and competition. The external variables that have significant impact on NW in large banks are interest rates, money supply and growth in coincident indicator. The internal variables that impact NIM in small banks are loan to deposit ratio, liquidity, competition, operating efficiency and return on asset. The external variables that significantly impact NIM in small banks are interest rates, money supply and interest rates variability. The internal variables that impacts NW in small banks are loan to deposit ratio, operating efficiency, market share, return on assets, competition and growth in assets. The external variables that impacts NW in small banks are, interest rates, and growth in coincident indicator. The variables that are significantly different when comparing large banks to small banks in term of Net interest margin are liquidity, Interest rates and operating efficiency. The variables that are significantly different when comparing large banks to small banks in terms of Net worth are liquidity, loan to deposit ratio, competition, operating efficiency and return on assets.