Navigating the new normal: drivers of European bank profitability post-crisis (2013-2023)

This study explores the factors influencing bank profitability, with a particular focus on the European banking sector. It seeks to enhance ‎our understanding of the financial drivers behind banks operating in this diverse and complex market. Through comprehensive empirical ‎analysis, the research identifies key elements that affect profitability across European banks. Using a dataset of 31 major European banks, ‎covering the period from 2013 to 2023, advanced econometric methods, such as panel data analysis, are employed to assess various determinants of bank profitability. The study considers internal factors specific to each bank, drawn from their financial data, alongside macroeconomic indicators like GDP growth and inflation, sourced from the World Bank. The findings reveal that both bank-specific factors, such ‎as size and capital ratios, and broader economic conditions, including inflation and the effects of the COVID-19 pandemic, have a significant ‎impact on profitability. The results underscore the importance of maintaining adequate financial reserves, effective loan management, and the ‎ability to navigate economic uncertainties, especially during crises. Among the econometric models evaluated, the fixed-effects model ‎proved to be the most accurate in explaining variations in bank profitability‎.