The main objective of this paper is to examine the determinants of banking profitability and loan quality under distressed economic conditions caused by political instability, This study scrutinizes the stability of the banking sector in the face of potential regional political unrest, with a specific focus on the economic hardship that followed the Egyptian revolution between 2011 and 2019, on quarterly basis for all banks listed on the Egyptian stock market out of all operating banks in Egypt; as banks listed on a stock exchange (controlled by shareholders) are expected to perform more efficient and more profitable.
The regression incorporated in the thesis is GMM technique to overcome problem of heteroskedasticity and serial correlation with the disturbance term, findings of profitability models suggest that bank specific and industry specific variables were the main determinants of banking profitability and asset management variables is found to have the most explanatory power of the model while all macroeconomic variables are insignificantly correlated with banks profitability which indicates that macroeconomic conditions after the revolution were not the main determinants of banks profitability, while findings of NPLs model reveal that bank specific variables such as bank profitability, measured by ROA, asset management ratio, market share, loan growth and loan to assets are found to be significant in determining loan quality; while macroeconomic variables are found to be insignificant determinant of loan quality except for interest rate and exchange rate, interest rate was found to have highest explanatory power in borrowers' ability in repayment of loans.