From the early 1990s until 1998, Argentina liberalised its banking system as part of a strategy to enter a globalised economy. The subsequent monetary policies, combined with ‘convertibilidad’ and an elevated government debt, led to a loss of confidence in the financial system, ending in the deep recession of 1998–2002. A sovereign debt default of $100 billion in December 2001 followed, and in January 2002 the fixed exchange regime was officially abandoned. This paper examines how firm-specific characteristics and the overall financial and macroeconomic environment affected Argentine bank profitability over the period 1994-2011. We use a large panel data of 62 commercial banks drawn from the Bankscope database. Our findings highlight that internal characteristics of banks (i.e., capitalisation, credit risk, operating expenses), financial environment of the banking industry and macroeconomic trends such as the growth in GDP per capita income have a significant effect on bank returns. Finally, we discuss policy outcomes including the way Central Bank of Argentina handled the crisis and trends in the banking industry. This study seeks to draw the strategic implications for banking systems in developing countries that are contending with globalisation.