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This paper explores the determinants of profitability across large euro area banks using a novel approach based on conditional profitability distributions. Real GDP growth and the NPL ratio are shown to be the most reliable determinants of bank profitability. However, the estimated conditional distributions reveal that, while higher growth would raise profits on average, a large swath of banks would most likely continue to struggle even amid a strong economic recovery. Therefore, for some banks, a determined reduction in NPLs combined with cost efficiency improvements and customized changes to their business models appears to be the most promising strategy for durably raising profitability.

Eurozone. --- Bank profits. --- Europe. --- Gay culture Europe --- Europe --- Bank earnings --- Profit --- Euro area --- Euro zone --- Monetary unions --- Banks and Banking --- Finance: General --- Macroeconomics --- Industries: Financial Services --- Banks --- Depository Institutions --- Micro Finance Institutions --- Mortgages --- General Financial Markets: Government Policy and Regulation --- Personal Income, Wealth, and Their Distributions --- Interest Rates: Determination, Term Structure, and Effects --- Financial Institutions and Services: Government Policy and Regulation --- Finance --- Banking --- Financial services law & regulation --- Bank soundness --- Nonperforming loans --- Personal income --- Yield curve --- Financial sector policy and analysis --- Financial institutions --- National accounts --- Financial services --- Loan loss provisions --- Financial regulation and supervision --- Banks and banking --- Loans --- Income --- Interest rates --- State supervision --- France