THE IMPACT OF ECONOMIC TRENDS ON BANK PROFITABILITY – THE CASE OF SERBIA AND CROATIA.

This paper analyses the direction and intensity of the impact of economic trends on the profitability of banks in Serbia and Croatia in the period between the years 2006 and 2021. This paper aims to determine which indicators of economic trends have the most substantial impact on the profitability of banks in the selected countries. As key indicators of economic trends, GDP per capita, the GDP growth rate, inflation rate, real interest rate, broad money growth, general government final consumption expenditure, current account balance, gross savings, trade, and unemployment are selected as independent variables. At the same time, bank profitability was measured with bank return on equity, in percentages (ROE), and bank return on assets, in percentages (ROA) – two indicators which represent the dependent variables selected for this research. Descriptive analysis, mean difference, correlation, and univariate and multivariate regression were used in the research. Research results show that changes in real interest rates and unemployment have a significant impact on the profitability of banks in both of the selected countries, while changes in GDP per capita growth have a statistically significant effect only in Serbia, and general government final consumption expenditure has a statistically significant impact only in Croatia. The influence of other indicators of economic trends is not statistically significant. [ABSTRACT FROM AUTHOR]