Turkish Banking Sector’s Profitability Factors

Yıl 2013, Cilt: 3 Sayı: 1, 27 - 41, 01.03.2013

Songül Kakilli Acaravcı Ahmet Ertuğrul Çalım

Öz

The profitability of banking sector is the most important instrument of financial system
for the future of the economy. The objective of this study is to determine by using Johansen and
Juselius cointegration test approach of the bank specific and macroeconomic factors that affect the
profitability of commercial banks in Turkish banking sector. In study, the data are collected from the
three biggest state-owned, privately-owned and foreign banks. The sample period spans from 1998 to
2011. In the study, return of asset, return of equity and net interest margin were used as proxy for
profitability of banks. The bank specific determinants, which were thought to have effects on
profitability are total credits/total assets, total deposits/total assets, total liquid assets/total assets, total
wage and commission incomes/ total assets, total wage and commission expenses/total assets, the
logarithm of total assets and total equity/total assets. The macroeconomic determinants of study are
real gross domestic product, inflation rate, real exchange rate and real interest rate. Empirical findings
suggest that the bank specific determinants have been more effect than macroeconomic factors on
profitability of the banks. The reel gross domestic product and real exchange rate have been effective
on the profitability. In addition, the 2001 economic crisis has a negative effect on all Turkish Banking
sector.

Anahtar Kelimeler

Profitability of banking, banking performance, deposit banks, the net interest margin, time series analysis