The Determinants of Banking Sector Profitability in Turkey (original) (raw)
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Determinants of the Profitability of Banking Sector in Turkey
Doğuş Üniversitesi Dergisi, 2022
The profitability of banks is an important subject around the world, since the banking system is a vital component in any economy, thus interests many parties including investors and regulatory bodies. This study aims to shed light to the factors that affect the profitability of banks in Turkey across bank types using the annual data for the banks in Turkey between 2004 and 2017. Overall, credit riskiness, funding cost and GDP growth has a positive effect and operating cost has a negative effect on bank profitability. Higher illiquidity, funding cost and operating cost significantly positively affects profitability for large, private and foreign banks but not for state banks. Labor productivity however, while significantly positively affects profitability for foreign banks, it has a negative effect on profitability for large and private banks. The findings suggest important regulatory suggestions for the banking and finance system.
Determinants of Profitability in Turkish Banking Sector: 2002-2007
In this paper, determinants of return on assets (ROA) and return on equity (ROE) for banks in Turkey was explored in 2002-2007 period using monthly data and aggregate balance sheet of the banks, through multi-variable single-equation regression method. Regression results demonstrate that consumer price index inflation and first difference of ratio of off-balance sheet transactions to total assets affect profitability indicators negatively in a statistically significant manner, while first differences of industrial production index, the ratio of budget balance to industrial production index and the ratio of equity to total assets affect profitability indicators positively in a statistically significant way.
Bank Specific Determinants Of ProfitabilityIn Turkish Banks
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This paper examines the profitability of Turkish commercial banks during the period 2005-2014. We use bank-specific determinants to predict the following years' profitability measured by return on assets (ROA). Among the performance measures, the amount of net interest income as a proportion of total operating income is positive related to profitability. It remains important for banks to loan money out at a rate higher than their cost of capital. Non-interest income as a proportion of total assets is strongly positively related to profitability. Consumer loans as a proportion of total loans is negatively related to profitability. Our findings indicate that while the traditional source of bank profits from lending remains crucial, diversifying away from consumer loans into earning income from non-interest sources is important for enhancing bank profitability. ii ACKNOWLEDGMENTS This thesis was made possible through the help of many individuals. Firstly, I would like to thank my thesis advisor Dr. Glenn Growe from Fort Hays State University for his knowledge, guidance, and patience. His door was always open whenever I had questions about my research. I could not imagine completing my thesis without his help. Beside my advisor, I would like to thank Serhat Yuksel from Konya Food & Agriculture University for providing Turkish bank data. Also, I would like to thank Dr. Yang Jiao from Fort Hays State University for her help with statistics. Thanks also to Dr. Dosse Toulaboe from Fort Hays State University for reviewing my thesis, and supporting me along the way. I thank my parents for always being supportive throughout my entire life. I am also grateful to my friends who encouraged me along my thesis.
Determinants of Deposit Bank Profitability : Evidence from Turkey
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This study aims to investigate the impact of bank-specific and macroeconomic factors on deposit bank profitability in Turkey. To present the significance of these variables OLS methodology is performed to construct multiple regression analysis. Monthly data is employed for the period over 2006:1 to 2016:2. Empirical results suggested that, equity over total assets, non-performing loans to total cash loans, net interest revenues to average total assets, and central bank policy interest rate have a significant impact over return on assets while non-interest income over total assets, market share of deposit banks in banking sector, operational expenses to average total assets, and exchange rate are not statistically significant. Also, effect of recent global financial crisis on bank performance is significantly negative. Indeed, result of this study provide supportive evidence that financial crisis adversely affected banking industry performance in Turkey. JEL Classification: C51, G21
The aim of this study is to examine the bank-specific and macroeconomic determinants of the banks profitability in Turkey over the time period from 2002 to 2010. The bank profitability is measured by return on assets (ROA) and return on equity (ROE) as a function of bank-specific and macroeconomic determinants. Using a balanced panel data set, the results show that asset size and non-interest income have a positive and significant effect on bank profitability. However, size of credit portfolio and loans under follow-up have a negative and significant impact on bank profitability. With regard to macroeconomic variables, only the real interest rate affects the performance of banks positively. These results suggest that banks can improve their profitability through increasing bank size and non-interest income, decreasing credit/asset ratio. In addition, higher real interest rate can lead to higher bank profitability.
The Determinants of Profitability Large-Scale and Small Scale Turkish Deposit Banks
Journal of corporate governance, insurance and risk management, 2021
This paper aims to explore the bank-specific and macroeconomic determinants of the banks’ profitability by dividing the Turkish deposit banks into large-scale and small-scale entities. For this purpose, panel data analysis was applied using a fixed effects model, based on quarterly data for the period from March 2009 to September 2020 for 24 deposit banks. Return on assets and return on equity are used as a measure of the banks’ profitability. According to the results, the determinants of profitability differ between large-scale banks and small-scale banks. With respect to the bank-specific determinants, the findings show that the equity/assets, deposits/assets and liquidity ratio have a significant impact on the profitability of large-scale banks, whereas they have no relationship with the profitability of small-scale banks. The profitability of large-scale banks is negatively affected by their asset quality ratios. On the other hand, while the ratio of loans to total assets has no...
Journal of Central Banking Theory and Practice, 2023
The present study aims to identify the internal and external factors that affect the profitability of banks operating in Turkey. For this purpose, the study used data from 23 public, private, and foreign banks, covering the period from 2007 to 2020. Two dependent variables were used as the profitability indicators of banks, namely, the Return on Equity (ROE) and the Return on Assets (ROA). In order to increase the reliability of the models developed during the study, Dynamic Generalized Method of Moments (GMM) and Fixed Effect Model (FEM) were applied. Results of the analysis indicate a positive and statistically significant relation between inflation rate and GDP growth rate, and ROA and ROE. According to the results of GMM, there was a positive relation between ROA and ROE, and 1-year and 2-year lagged ROA and ROE. This situation may be explained by the fact that profits acquired in the Turkish banking sector are steady. ROA and ROE were observed to have a positive relation with inflation rate and economic growth rate. In other words, the increase in inflation rate and GDP growth rate positively affect profitability of public, private, and foreign banks.
Determinants of banking sector performance in some selected OIC member Nations: Turkey
The objective of this paper is to establish the determinants of banking sector in some selected OIC member Nations including; Turkey, Islamic Republic of Iran, Saudi Arabia, Egypt, Indonesia and Algeria. The study which specifically examined some internal and external factors affecting the profitability of banking performance of these selected countries adopted econometrics techniques of static models by employing fixed effects of panel regression models starting the period from 2010-2019. This result shows that the increase in liquidity, efficiency, capitalization economic growth leads the increase in banking performance, whereas , Inflation and bank size could result in decreasing banks' profitability. The result implies that the performance of banking sector of these six selected nations are mainly from internal banking factors and change in increase may lead change in performance which reveals that there are positive relations among the majority of internal variables and the performance of banks in OIC selected nations. On the other hand, most of external factors including inflation has negative relation with banking performance which means change in increase of inflation leads decrease in banking performance proportionally. The study recommends further research by adding variables that are not mentioned in our study such as; interest margins, bank risk measurement variables, GNP and etc. The limitation of the model could be another factor which if employed dynamic model may come up with other conclusion and result for the strengthening the effectiveness of the model.
Social Science Research Network, 2011
The aim of this study is to examine the bank-specific and macroeconomic determinants of the banks profitability in Turkey over the time period from 2002 to 2010. The bank profitability is measured by return on assets (ROA) and return on equity (ROE) as a function of bank-specific and macroeconomic determinants. Using a balanced panel data set, the results show that asset size and non-interest income have a positive and significant effect on bank profitability. However, size of credit portfolio and loans under follow-up have a negative and significant impact on bank profitability. With regard to macroeconomic variables, only the real interest rate affects the performance of banks positively. These results suggest that banks can improve their profitability through increasing bank size and non-interest income, decreasing credit/asset ratio. In addition, higher real interest rate can lead to higher bank profitability.
Yaşanan son finansal kriz dünyada birçok ülkenin finansal sistemleri üzerinde etkili olmuştur. Gelişmekte olan ekonomilerden olan Türkiye ekonomisi de bu krizden etkilenmiştir, ancak sözkonusu krizin özellikle bankacılık sektörüne etkilerini inceleyen çalışmaların sayısı kısıtlıdır. Bu nedenle, bu çalışmanın amacı son finansal krizin Türkiye'de faaliyet gösteren bankaların karlılıklarının belirleyicileri üzerine etkisini saptamaktır. Analiz dönemi Aralık 2003-Haziran 2012 dönemini kapsamakta olup, bu dönem kriz öncesi ve kriz sonrası olmak üzere ikiye ayrılmıştır. Kriz öncesi ve sonrası dönemlerde banka karlılığını etkileyen faktörleri saptayabilmek üzere sistem GMM tahmincisi kullanılmıştır. Sonuç olarak bulgular, Türk bankacılık sektöründeki bankaların karlılıklarının son finansal krizden önemli ölçü de etkilenmese de, krizin banka karlılığının belirleyicileri üzerinde birtakım etkileri olduğunu göstermektedir.