Abstract:
The main objective of this study was to examine the determinants of financial performance of United
Banks S.C in Ethiopia. These factors could be either internal or external factors. Internal factors are
factors that are mainly influenced by a bank management and also called bank specific factors. Those
factors include Capital adequacy, asset quality, earning ability, liquidity management and bank size.
Furthermore, external factors represent events outside the influence of the banks and also called
macroeconomic factor which is foreign exchange rate among others. The data in this research were
panel data obtained from secondary sources collected from twelve sampled united banks established
before 2014 in Amhara regional states. The data collected were analysis using SPSS software. Both
descriptive and inferential statistics were used in the analysis. Three regression models were used for
financial performance measures: Return on Assets (ROA), Return on Equity (ROE), and Net Interest
Margin (NIM). The result of the study revealed that for bank performance measured in Net Interest
Margin (NIM) Capital Adequacy (CA), Earning Ability (EA) and Bank Size (BS) had a significant
impact. In addition, the study has showed positive coefficient for financial performance measured by
Net Interest Margin (NIM) Capital Adequacy (CA), Earning Ability (EA) and Bank Size (BS) and
Foreign Exchange Rate (FEXRA) while Asset Quality (AQ) have negative coefficient. In the case of
financial performance measured by Return on Assets (ROA); Capital Adequacy (CA), Asset Quality
(AQ), Earning Ability (EA) and Bank Size (BS) have significant impact on the financial performance of
the banks, but Liquidity Management (LM) and Foreign Exchange Rate (FEXRA) have no significant
impact. Capital Adequacy (CA) and Bank Size (BS) have positive coefficient, but Asset Quality (AQ),
Earning Ability (EA), Liquidity Management (LM) and Foreign Exchange Rate (FEXRA) have negative
coefficient. Except Liquidity Management (LM) and Foreign Exchange Rate (FEXRA) all independent
variables have negative relationship with return on asset in agreement with the hypothesis. Moreover,
with regard to Return on Equity (ROE) as a financial performance measure for the study all explanatory
variables except BS i.e. Capital Adequacy (CA), Asset Quality (AQ), Earning Ability (EA), Liquidity
Management (LM), and Foreign Exchange Rate (FEXRA) has a negative relationship. Based on the
study finding, the financial performance of united banks s.c as measured by ROA, ROE and NIM are
mainly affected by the internal factors: Capital adequacy, Earning ability and Bank size. Therefore, it is
possible to improve the performance of the bank by giving more attention on the identified bank specific
