Effect of Macroeconomic Factors on the Profitability of Banks in Germany
- The objective of this paper was to determine the effect of macroeconomic variables on the profitability of banks in Germany using the quarterly data from the time period of 1996 to 2018. The data was collected from FRED, OECD and European Central Bank Statistical Data Warehouse. This study used multiple regression to examine the effect of macroeconomic variables (GDP, interest rate spread, share price, unemployment, exchange rate, inflation, credit loan and wage) on the profitability which is measured by ROA. The analysis was conducted in EViews10. The empirical finding from the study suggested that there is a significant relationship between interest rate spread, unemployment, share prices and return on asset. However, there is no significant relationship between GDP, exchange rate, inflation, credit loan, wage and return on asset. Therefore, the banks and government are recommended to implement better policies and monitor the macroeconomic variables to improve the financial performance of banks in Germany.