Determinants of the Rate of Return on Commercial Bank Assets, 1933-1998

This empirical study seeks to identify, for the period 1933-1998, determinants of the rate of return on bank assets (ROA). The study finds that the ROA has been an increasing function of the interest rate yield on bank loans to the private sector, the growth rate of real GDP, and the percentage of deposits covered by federal deposit insurance. In addition, the ROA appears to have benefited from the implementation of provisions in the Federal Deposit Insurance Corporation Improvement Act of 1991. Finally, increased financial services industry competition has reduced the ROA.