Studying The Statistical Relationship Between Bank Profitability (Roa, Roe) And Credit And Deposit Intermediation

Abstract

This research investigates how credit and deposit intermediation relate statistically to bank profitability measured by return on assets (ROA) and return on equity (ROE). Building on intermediation theory and efficiency measurement, we specify a parsimonious empirical model in which loans-to-assets and deposits-to-assets act as core intermediation proxies, while net interest margin, cost-to-income, and bank size serve as controls. We describe the construction of variables, motivate linear functional forms, discuss identification risks and diagnostics, and provide an illustrative framework for reading coefficients as conditional associations rather than causal effects. A compact table clarifies variable definitions and expected coefficient signs in ROA and ROE equations, and a conceptual diagram maps the influence channels linking intermediation to profitability under margin and cost conditions. The thesis concludes with guidance for analysts and researchers on panel specifications, disaggregation of funding and loan mixes, and transparent documentation to enhance decision relevance.