Abstract:
This study examined the determinants of banks’ performance (profitability) in Tanzania using a 
balanced panel data set consisting of 25 commercial banks for the period from 2007 to 2012. The 
study employed the fixed effects (within) model of analysis in Stata 10. The bank performance was 
measured by profitability proxies which are Return on Assets (ROA), Return on Equity (ROE), and 
Net Interest Margin (NIM) as a function of bank specific, industry specific and macroeconomic 
determinants. The findings revealed that bank size (SIZE), size bank system (SBS) have a positive 
and significant impact on bank performance. However, non-performing loans (NPLs), capital 
adequacy and operational efficiency measure proxied by cost income ratio (CIR) have a negative 
and significant effect on banks performance. Furthermore, macroeconomic determinants namely 
GDP growth and inflation do not affect bank performance. The study results suggest that banks 
can improve their performance by increasing bank size, decreasing non-performing loans and 
managing its operating expenses. In addition, health financial system through increased size bank 
system can boost their performance.