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Profitability Analysis of Banks An Application on the Turkish Banking Industry

Gözde Cerci,, Serkan Yilmaz Kandir and Yildirim Beyazit Onal

Istanbul Stock Exchange Review, 2012, vol. 13, issue 50, 29-44

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.

Keywords: Return on Assets; Net Interest Margin; Commercial Banks; Least Squares Estimation Method; Multiple Linear Regression Method (search for similar items in EconPapers)
JEL-codes: G21 G30 (search for similar items in EconPapers)
Date: 2012
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Handle: RePEc:bor:iserev:v:13:y:2012:i:50:p:29-44