PROFITABILITY OF BANKS IN BOSNIA AND HERZEGOVINA: PANEL ANALYSIS

Abstract

This paper examines the factors that determine the profitability of the banking sector in Bosnia and Herzegovina, measured by return on assets and net interest margin in the period 2008-2014. As the independent variables we used internal variables specific to the operations of banks, as well as external variables that represent the most important macroeconomic indicators. The analysis showed that the most significant impact of internal variables includes: cost-assets ratio of permanent and total assets, and the scope of the bank. When it comes to macroeconomic variables, inflation shows a significant effect on the movement of profitability of the banking sector in Bosnia and Herzegovina.