Evaluation of Profitability Factors of Digital Banks in the UK From 2018 to 2023 , PANEL data analysis

Abstract

International banks are increasingly establishing digital banks, a trend that has been accelerated by the COVID-19 crisis, during which digital transformation has surged across many sectors. Our study aims to evaluate the factors affecting the profitability of digital banks in five banks in the U.K from 2018 to 2023 measuring with profitability metrics, using the multiple regression with panel data and analyzing data with EVIEWS program. The study reveals that Non-interest income ratio negatively affects both ROA (Return on Assets) and ROE(Return on Equity), asset size significantly influence the profitability of digital banks Additionally, customer growth negatively impacts ROE, and technology costs do not significantly affect ROA or ROE but affect negatively the net profit margin. Despite their modernity, these banks have managed to capture market share and attract many customers. To improve profitability, banks should focus on managing costs by investing in cost-effective technology solutions that enhance operational efficiency and optimize assets by entering new markets