ANALYZING THE INFLUENCE OF BANK LOANS AND CAPITAL ADEQUACY RATIO ON ALBANIAN BANKS' PROFITABILITY

The material involved in this study is secondary data from the annual reports of seven banks between the periods 2017-2022. This paper targeted the relationship of Return on Assets, Bank Loan, and Capital Adequacy Ratio using Multiple Linear Regression. Descriptive statistics of this study showed an average of 0.73 as the return on assets, with a high variability of bank loans (mean: 40.97) compared to the average CAR of 17.78. The correlation study shows a very low negative correlation between Bank Loans and CAR: r = -0.46. It indicates that as a bank loans increase, the Capital Adequacy Ratio decreases. Regression analysis on the matter shows a model with a power of explanation of 0.5 and statistically significant coefficients for Bank Loan (-0.0683) and CAR (-0.1677). In summary, an increase in Bank Loan and CAR are associated with a decrease in ROA. In addition, 25 percent of the ROA values were below 0.31. This indicates that a large portion of banks experience a decline in return. The quartile analysis of Bank Loan and CAR also shows that 25 percent of Bank Loan values are below 30.90, while 25 percent of CAR values are below 15.40, indicating the spread of such variables in the sample. All of these together show the value of the effective control of bank loans and the maintenance of adequate capital reserves in order to achieve, among other things, the optimization of the Return on Assets and ensuring financial stability.