THE IMPACT OF OIL PRICE ON BANK PROFITABILITY IN CANADA

Using the ordinary least squares estimation, this paper analyzes the impact of oil price on bank profitability in Canada. We use data on 10 public banks from 1995 to 2015. Our profitability determinants include bank-specific characteristics and macroeconomic factors. We separately consider how banks react to two dramatically drops during these 20 years. We find that there is a significantly positive relationship between the oil price and bank profitability in the early period, but no evidence shows that they have relationship in recent years. This evidence that Canadian banks have taken action to immunize from the risk of oil price drop.