## 5 Discussion
In contrast, developed economies with more mature financial markets may witness a more direct positive impact of GDP on banking profitability;
* Banking Digitalization Influence: The negative impact of banking sector digitalization through internet banking use (LOGEBANK) is more pronounced in lower quantiles, implying that in less developed financial systems, smaller or struggling banks may face greater barriers to accessing credit, while well-performing banks may already have alternative financing options. In contrast, in countries with highly liquid financial markets, banking digitalization may not significantly hinder profitability;
* Digital Inclusion and Profitability: The stronger effect of digital inclusion at higher quantiles highlights that banks in more technologically advanced economies extract greater benefits from digital transformation. In countries with limited digital penetration, banks may not yet fully capitalize on technology to drive profitability;
* Human Capital Development: The positive effect of human capital development at lower quantiles suggests that in emerging economies, education and workforce skills play an important role in helping less profitable banks improve their performance. In advanced economies, where human capital is already well-developed, its marginal impact on banking profitability may be less pronounced;
* Innovation Investment: The persistently negative impact of innovation expenditures across all quantiles points to a challenge in converting technological investments into immediate profitability, particularly in countries where R&D ecosystems are underdeveloped. Advanced economies with strong intellectual property rights and innovation commercialization mechanisms may mitigate these negative effects more effectively;
* Policy and Structural Differences: The findings suggest that developing countries may need stronger institutional support to enhance the effectiveness of GDP growth, financial sector policies, and digital transformation in fostering banking profitability. Meanwhile, banks in developed countries are likely to benefit more from digitalization and research-driven innovation strategies. The MMQR model results provide strong empirical evidence that bank profitability is shaped by a combination of macroeconomic, financial, technological, and structural determinants, with varying effects across profitability levels. The robustness tests confirm the validity of the estimated relationships, reinforcing the need for differentiated policy interventions. While digital transformation and human capital investments emerge as significant drivers of banking performance, financial sector constraints and inefficiencies in innovation investment persist as barriers to growth. Cross-country comparisons further highlight the importance of tailoring economic policies to national institutional and market conditions, ensuring that banks across the profitability spectrum can optimize their performance in line with broader macroeconomic objectives. The analysis of the MMQR results in the context of EU countries reveals significant insights into the determinants of banking sector profitability, measured through return on equity (ROE), across different quantiles. The findings indicate that GDP levels exert a predominantly negative influence on ROE, particularly at lower quantiles, suggesting that economic expansion does not necessarily translate into higher bank profitability, potentially due to increased competition or regulatory constraints. Similarly, the size of the banking sector, as measured by the number of banking institutions, appears to diminish profitability, an effect that becomes more pronounced at higher quantiles. This pattern may reflect the challenges associated with oversaturation in the financial sector, where competition erodes margins and leads to inefficiencies. In contrast, digital inclusion emerges as a robust driver of profitability, exerting a stronger impact on banks operating at higher quantiles.