Open Access Article

Analyzing the Influence of Post-2018 Macroeconomic and Bank-Specific Indicators on Banking Sector Profitability: Evidence from Pakistan

Authors

Muhammad Iqbal(1) Muhammad Iqbal Affiliation M. Phil. Scholar, Department of Commerce, Allama Iqbal Open University, Islamabad Other articles by this author , Muhammad Munir Ahmad(2) Muhammad Munir Ahmad Corresponding author Affiliation Assistant Professor, Department of Commerce, Allama Iqbal Open University, Islamabad Email addressmunir.ahmad@aiou.edu.pk Other articles by this author , Naeem Raza(3) Naeem Raza Affiliation M. Phil. Scholar, Department of Commerce, Allama Iqbal Open University, Islamabad Other articles by this author , Muhammad Tayyeb Hafeez(4) Muhammad Tayyeb Hafeez Affiliation M.Phil. Scholar, Department of Commerce, Bahauddin Zakariya University, Multan Other articles by this author

  1. M. Phil. Scholar, Department of Commerce, Allama Iqbal Open University, Islamabad
  2. Assistant Professor, Department of Commerce, Allama Iqbal Open University, Islamabad
  3. M. Phil. Scholar, Department of Commerce, Allama Iqbal Open University, Islamabad
  4. M.Phil. Scholar, Department of Commerce, Bahauddin Zakariya University, Multan

https://doi.org/10.36923/jcmi.v6i1.643

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Abstract

This study examines the impact of macroeconomic and bank-specific indicators on the profitability of Pakistan’s banking sector, focusing on the volatile post-2018 period. Using return on assets (ROA) as the performance metric, it analyzes data from 20 commercial banks between 2018 and 2023. Panel data regression, conducted via Gretl software, reveals that these internal factors—Capital Adequacy Ratio (CAR), Spread Ratio (SR), and Earnings per Share (EPS)—positively and significantly influence ROA, while Firm Size (SZ) has a significant negative effect. In contrast, macroeconomic indicators like Exchange Rate (EXR), GDP, and Policy Rate (POLR) show insignificant negative relationships, and Inflation (INF), Foreign Exchange Reserves (FXRV), and Cash Equivalents (CEQU) have insignificant positive effects. These findings highlight that bank-level factors play a more critical role than external economic conditions in determining profitability. The study recommends that bank managers focus on operational efficiency and

Article information

Keywords
Banking sector profitabilityPakistanForeign Exchange ReservesPolicy RateGeneralized Method of Moments
Section
Articles
Issue
Vol. 6 No. 1 (2025)
Submitted
April 5, 2025
Accepted
June 26, 2025
Published
June 27, 2025
Corresponding author
Muhammad Munir Ahmad
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