Are Banking Profits Persistent in Emerging Countries? Evidence from Africa and the Middle East

This paper studies profit persistence in the banking sector in 12 African and Middle Eastern countries between 2003 and 2019. We use a two-step system GMM to evaluate the speed of profit convergence toward the competitive norm and analyze determinants of banks' profitability in these countries. We observe a high level of profit persistence and a slow speed of adjustment, thus rejecting the static view of the competitive environment hypothesis. Our analysis suggests that solvency, efficiency, and economic growth are significant determinants of bank profitability, while the impact of other variables differs by region and depends on the profit metric