Economics at your fingertips  

Determinants of Profitability in the Banking Sector: An Analysis of Post-Soviet Countries

Serhat Yüksel (), Shahriyar Mukhtarov (), Elvin Mammadov () and Mustafa Özsarı ()
Additional contact information
Serhat Yüksel: The School of Business, Istanbul Medipol University, Istanbul 34810, Turkey
Elvin Mammadov: Department of Economics and Management, Khazar University, 41 Mehseti Str., Baku AZ1096, Azerbaijan
Mustafa Özsarı: Department of Economics, Konya Food and Agriculture University, Konya 42080, Turkey

Economies, 2018, vol. 6, issue 3, 1-15

Abstract: The purpose of this paper is to identify the determinants of bank profitability in 13 post-Soviet countries. Within this scope, annual data between 1996 and 2016 is analyzed by using fixed effects panel regression and the Generalized Method of Moments (GMM). It is concluded that loan amount, non-interest income and economic growth are significant indicators of profitability. Moreover, the 2008 global mortgage crisis has a negative influence on bank profitability in post-Soviet countries. According to the estimation results, there is a positive relationship between non-interest income and economic growth with profitability. This result shows that when non-interest income of the banks increases, such as credit card fees and commission, it affects the financial performance of the banks, positively, and contributes to bank profitability. Another result of this study is that economic growth positively influences bank profitability. This result allows us to conclude that higher GDP comes with higher bank profitability for post-Soviet countries. Lastly, there is a negative relationship between loan-to-GDP ratio and profitability of the banks in post-Soviet countries. This means that when the ratio of total loans to GDP increases, it affects financial performance of the banks in a negative way. While considering this result, it is recommended that banks in post-Soviet countries should focus on ways to increase their non-interest income. Additionally, it is also significant for these banks to be careful and risk averse when lending to their customers.

Keywords: profitability; banking sector; panel regression; Generalized Method of Moments (GMM) methods; post-soviet countries (search for similar items in EconPapers)
JEL-codes: E F I J O Q (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link) (application/pdf) (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

Access Statistics for this article

Economies is currently edited by Prof. Dr. Ralf Fendel

More articles in Economies from MDPI, Open Access Journal
Bibliographic data for series maintained by XML Conversion Team ().

Page updated 2019-03-31
Handle: RePEc:gam:jecomi:v:6:y:2018:i:3:p:41-:d:158741