Banks profitability is necessary for determining the economic stability، It can be studied from micro and macro aspects of economic consideration. Regarding the factors affecting profitability، there have been many studies in Iran، however in none of them، the influence of concentration on profitability has been considered. This study investigates the relationship between banking industry concentration and profitability of state banks. To test the effect of concentration on banks profitability، based on research literature، three aspects of concentration in banking industry including concentration in assets، concentration in bank deposits and concentration in credits were considered and HHI index was used to measure concentration in the industry. Also، six control variables، including bank capital، bank size، bank efficiency (company-specific factors)، interest rates، economic development and the level of capital market (macroeconomic factors) as control (explanatory) variables were selected and measured. The profitability of banks was measured using the ratio of return on assets (net income divided by total assets). Findings of study show that banking industry concentration have positive relationship with bank profitability.

JEL Classification: E58, L16, P24, P10