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Profitability Analysis of Banks An Application on the Turkish Banking Industry

Author

Listed:
  • Gözde Cerci,
  • Serkan Yilmaz Kandir
  • Yildirim Beyazit Onal

Abstract

Aim of this study is to investigate the factors that affect the profitability of commercial banks, operating in Turkey, between January 2003 and May 2010. A multiple linear regression model is used for the econometric analysis. Independent variables include; loan loss provisions to non-performing loans, non-interest expense to net profit, total loans to total deposits and non-interest income to total assets and growth of money supply. Our findings suggest that loans to deposit ratio and non-interest income to total assets seem to have a positive effect, but non-interest expenses to net income ratio appears to have a negative effect on banks’ return on assets. Net interest margin of the commercial banks, another profitability proxy, seems to be positively affected by the ratio of total loans to total deposits, non-interest income to total assets ratio and also provisions for non-performing loans to non-performing loans ratio.

Suggested Citation

  • Gözde Cerci, & Serkan Yilmaz Kandir & Yildirim Beyazit Onal, 2012. "Profitability Analysis of Banks An Application on the Turkish Banking Industry," Istanbul Stock Exchange Review, Research and Business Development Department, Borsa Istanbul, vol. 13(50), pages 29-44.
    • Handle: RePEc:bor:iserev:v:13:y:2012:i:50:p:29-44
    as

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    File URL: http://www.borsaistanbul.com/datum/imkbdergi/EN/ISE_Review_50.pdf
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    References listed on IDEAS

    as
    1. Hardjo Koerniadi & Chandrasekhar Krishnamurti & Alireza Tourani-Rad, 2014. "Corporate governance and the variability of stock returns," International Journal of Managerial Finance, Emerald Group Publishing Limited, vol. 10(4), pages 494-510, August.
    2. Vitaliy Zheka, 2006. "Corporate Governance and Firm Performance in Ukraine," CERT Discussion Papers 0605, Centre for Economic Reform and Transformation, Heriot Watt University.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Return on Assets; Net Interest Margin; Commercial Banks; Least Squares Estimation Method; Multiple Linear Regression Method;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General

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