Analysis of Factors Influencing Profitability of Commercial Banks Listed at the Nairobi Securities Exchange (Nse)

Abstract

This study investigates the impact of microeconomic factors, technological advancements, and legal frameworks on the profitability of commercial banks listed at the Nairobi Securities Exchange (NSE) in Kenya. Data from mid-tier managers across ten banks and financial reports from 2018-2022 were analyzed. The study's theoretical framework is founded on economic plus financial theories that explore the dynamics of banking profitability in the context of evolving market conditions. The findings reveal that consumer preferences, competitive environments, and capital market engagements significantly influence profitability, with technological investments in digital banking and cybersecurity enhancing efficiency and customer service. Legal compliance, particularly in consumer protection and data privacy, is vital for sustaining profitability. Banks that are adept at navigating these regulatory landscapes and aligning their operations with legal mandates tend to maintain a competitive edge and ensure sustainable growth. The study underscores the complex challenges Kenyan banks face, such as managing non-performing loans and adapting to economic shocks, emphasizing the need for a holistic approach that integrates microeconomic conditions, technology, and legal frameworks. These insights are valuable for policymakers, bank managers, and investors in navigating the evolving financial landscape.