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Interest Rate and Financial Performance of Banks in Pakistan

Author

Listed:
  • Afzal Ahmed
  • Raja Rehan
  • Imran Umer Chhapra
  • Saima Supro

Abstract

The efficiency of banking sector is considered most important for the economic growth, monetary policy implementation and macro-economic stability. The objective of this study is to evaluate the impact of interest rate fluctuations on the profitability of banks. Thus, annual data of seven years from 2007 to 2014 has been taken for 20 banks operating in Pakistan. The sample banks are taken on the basis of highest market share and return. To make substantially noteworthy results study uses Correlation and Regression analysis in order to evaluate the impact of interest rate changes (INT), deposits with other banks (DWOB), advances and loans (ADV) and investment (INV) over the profitability indicators; return on assets (ROA), return on equity (ROE) and earnings per share (EPS). The result shows that deposits with other banks and interest rate are negatively affecting the profitability of banks, while advances and loans and investment are having positive influence over profitability of banks.

Suggested Citation

  • Afzal Ahmed & Raja Rehan & Imran Umer Chhapra & Saima Supro, 2018. "Interest Rate and Financial Performance of Banks in Pakistan," International Journal of Applied Economics, Finance and Accounting, Online Academic Press, vol. 2(1), pages 1-7.
    • Handle: RePEc:oap:ijaefa:v:2:y:2018:i:1:p:1-7:id:7
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    Citations

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    Cited by:

    1. Samia Nur Jui & Rokibul Hasan Sakib & Md. Abu Rafsan, 2020. "Association between Interest Rate Changes and Profitability of Commercial Banks of Bangladesh," International Journal of Science and Business, IJSAB International, vol. 4(9), pages 17-37.
    2. Nor Aishah Mohd Ali & Nawal Kasim, 2019. "Talent Management for Shariah Auditors: Case Study Evidence From the Practitioners," International Journal of Financial Research, International Journal of Financial Research, Sciedu Press, vol. 10(3), pages 252-266, May.
    3. Ally R. Ally, 2022. "Influence of Macro-Economic Factors on Financial Performance of Commercial Banks in Tanzania," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 14(7), pages 1-1, July.
    4. Thi Viet Ha Hoang & Ngoc Hung Dang & Manh Dung Tran & Thi Thuy Van Vu & Quang Trung Pham, 2019. "Determinants Influencing Financial Performance of Listed Firms: Quantile Regression Approach," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 9(1), pages 78-90, January.

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