This paper aims to investigate how company-level factors affect European banks profitability over the period 2006-2012. Our specification follows a panel data model selected according to the Hausman test and our regression estimates are derived using the Generalized Least Squares method. The profitability indicators are ROAA and ROAE; the profitability determinants are referred to size, revenue diversification, efficiency, credit portfolio, level and structure of capital, and funding. Overall our regression results indicate that the high bank profitability is associated with a good efficiency, a low percentage of net loans over total assets, a high growth of gross loans, and a high loan impairment charge over loans. Furthermore, our results generally show a negative impact of bank size and of the common equity over total equity. We also find an ambiguous relationship between funding indicators and profitability. We seek to analyze the impact of the recent financial crisis on profitability by splitting up the years observed into two sub-periods (the pre-crisis period and the crisis years), so that we generate new information about the impact of the crisis on European banks. Furthermore, our profitability determinants include some variables not considered in previous studies.
Keywords: financial crisis, European banking system, profitability determinants, performance, panel data.