Determinants of profitability in Turkish banking system

Demirbaş, Nesrin
This thesis analyses the effect of sectoral and macroeconomic variables on the profitability of the Turkish commercial banks over the period 2005-2009:3 by using multiple regressions. In this study, profitability of Turkish banking system in the mentioned period is discussed and questions such as why some commercial banks are more profitable than others and to what extent discrepancies in banks’ profitability are due to variation in endogenous factors under the control of bank management and to what extent external factors impact the profitability performance of these banks are sought to answer. Firstly, the empirical results revealed that sectoral characteristics explain a substantial part of the within country variation in bank interest margins and net profitability. High profitability tends to be associated with banks that hold a relatively high amount of equity capital, and with large non interest income. Other important internal determinants of banks’ profitability are non-interest expenses and fixed assets which have negative and significant impact. Also, equity capital is the internal determinant of net interest margin. Secondly, it is found that inflation is the macroeconomic determinant of net interest margin and profitability.


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Citation Formats
N. Demirbaş, “Determinants of profitability in Turkish banking system,” M.S. - Master of Science, Middle East Technical University, 2009.