6. Conclusion:
The core objective of this article is to analyze the impact of internal characteristics (e.g. size, leverage, liquidity, operating expenses, management fee and age) on profitability of listed Modarabas in Pakistan. Pooled OLS method used to estimate the effects of internal characteristics on profitability measured as profit margin, return on investment and earnings per certificate. Data was taken from financial statement analysis (FSA) of financial firms compiled by SBP during 2011-2015. Results show that size of Modarabasis positively related to profit margin and return on investment. The possible reasons for positive association between size and profitability are, first, large Modarabashave high turnover compared to small Modarabas
…show more content…
A. and Yousaf, M.,“Determinants of profit heterogeneity at firm level: Evidence from Pakistan”, International Journal of Commerce and Management, Vol. 24 No.1 (2014),pp.25-39
6 Petria, N.,Caprarub, B. and Ihnatov, I., “Determinants of banks’ profitability: evidence from EU 27 banking systems”, Procedia - Economics and Finance, Vol. 20 (2015),pp.518-524
7 Ćurak, M.,Poposki, K. and Pepur, S., “Profitability determinants of the Macedonian banking sector in changing environment” Procedia - Social and Behavioral Sciences, Vol. 44 (2012),pp.406-416
8 Dietrich, A. and Wanzenried, G., “The determinants of commercial banking profitability in low-,middle-, and high-income countries” The Quarterly Review of Economics and Finance, Vol. 54 (2014),pp.337-354
9 Saona, P., “Intra- and extra-bank determinants of Latin American banks’ profitability”, International Review of Economics and Finance, Vol. 45 (2016),pp.197-214
10 Zuidberg,J., “Exploring the determinants for airport profitability: Traffic characteristics, low-cost carriers, seasonality and cost efficiency”, Transportation Research Part A, Vol.101(2017),pp.61-72
11 Sheikh, N. A. and Karim, S., “Determinants of profitability of Islamic commercial banks: Evidence from Pakistan”, Pakistan Journal of Islamic Research, Vol. 17
The banking industry has undergone major upheaval in recent years, largely due to the lingering recessionary environment and increased regulatory environment. Many banks have failed in the face of such tough environmental conditions. These conditions
Main competitive pitch of Islamic banking is in Sharia compliant and interest free. But the real business of Islamic banking is producing profit.
The overall profitability of Chemical Bank has been negatively affected by a decrease in profit contribution from Due Bills. There is an external threat of reduced interest rates and internal threats in the form of misalignment between involved divisions.
Recent studies have investigated the impact of the 2007-2009 financial crises on banks’ capital. Berger and Bouwman (2011) emphasised the importance of capital during financial crisis. Their empirical study concludes that banks with solid capital base have some benefits during the crisis than those that are poorly capitalised. Well capitalised banks are more able to withstand the shocks due to liquidity squeeze, and therefore had higher chances of surviving the crisis period. Other benefits accrued to well capitalised banks include increase in their market share and profitability, as customers withdrew their funds from less capitalised to a well-capitalised banks. This conclusion was also reinforced by a recent empirical study conducted Olivier de Bandt et al (2014) on a sample of large French banks over a period of 1993 – 2012. Similarly, Gambacorta and Marques-Ibanez (2011) demonstrate the existence of structural changes during the period of financial crisis. They conclude that banks with weaker core capital positions, greater dependence on market funding and on non-interest sources of income restricted the loan supply more strongly during the crisis period. Using a multi-country panel of banks, Demirgüç-Kunt, Detragiache and Merrouche (2010) find among others results, that during
Extensive research has determined that the banking industry is in an unstable state. The industry’s profits have
What roles have deregulation, innovation, and globalization played in changing the character of bank management in recent decades? Has the overall outcome of the changes been greater stability in the banking sector? Discuss the respective roles of asset and liability management in modern banking.
The Banking Industry plays an important role in the economic development of the country and is the most dominant segment of the financial sector. Banks encourage economic growth by allocating savings to investments that have potential to yield higher returns. They perform their basic role of accepting deposits and lending funds from these deposits. Banks securely save the money of depositors, provide interest to them, and lend the funds raised from depositors to consumers. They are in a wide range of sizes, from large Global Banks to Regional and Community Banks. We can study the structure of an organized banking industry by taking an example of Indian banking industry:
Banking industry is currently operating in the maturity stage. There are many players as a result of which the competition is quite high. Competition is broadly based on the levels of fees charged, reputation, the range of services and products provided. As the industry consolidates and the range of services broadens, the size and geographic spread of industry players in increasing. Providing a high set of barriers is the capital and regulatory requirements within the banking sector. Entities that want to start up as a commercial bank and/or investment bank or securities dealer face significant establishment costs in order to gain acceptance and meet market reputation. Furthermore, start-ups require up-front expenses in order to establish proper distribution channels. Globalization is high and the trend is increasing. Cross-border sales and acquisitions of banking operations are also occurring, as assets are shuffled in the race to raise capital.
A bank is an institution that facilitates financial transactions between the parties. Amongst its standard operations are accepting deposits from the customers, lending money as loan (cite). The major source of income for banks is interest income which is earned on loans given to the customers, business firms and corporations. This very nature of it makes banking institutions so crucial for economic development of any country. Strong banking operations and fundamentals paves the way for higher customer and investor confidence in the company.
This indicates that SDB’s ability of making profits is stronger than the average level. Meanwhile, SDB’s non-interest income level and operating expense were above the average level in 2002. Nevertheless, SDB’s ROAA was 0.9% in 2000 and was only 0.3% in 2002. This ratio was merely half of the average ROAA of other five joint-stock banks in 2002 indicating that SDB’s profitability of the assets was relatively weak as well as its ROAE at the same time. SDB’s ROAE was only one-third of the average ROAE of five joint-stock banks. Therefore, SDB’s performance was not good compared with its industry peers; the reason of SDB’s bad performance is that an increasing assets generating low net income.
Referring to table X in appendix, it can be seen that the R square of these tables are about 0.17, which means 17% of the variance of profitability could be linearly explained by the independent variables (age, district, income, etc.). Thus, according to the regression results, it is apparent that income has positive relationship with profitability for online profitability as well as offline since the coefficients are all positive numbers. However, when I look in depth, I find that the Age group 5 (45-54 years old) has the highest average profitability for online segment, and this observation may give you some suggestions on online banking pricing strategy. In terms of how profit varies for different income groups, we can refer to table XX. It shows that people are divided into 9 different groups based on their income. In this table, it is clear that people with lowest income make the lowest profit for the bank on both online and offline segments. On the other hand, people with highest income, which is 125,000 per year or more, appears to be the most profitable customers of the bank. In addition, people from different districts also contribute different profit as well. For instance, people live in district 1200 are most profitable clients while those who live in districts 1100 and 1300 are less profitable.
Prashanta Athma (2000), in his Ph D research submitted at Usmania University Hyderabad, “Performance of Public Sector Banks – A Case Study of State Bank of Hyderabad, made an attempt to evaluate the performance of Public Sector Commercial Banks with special emphasis on State Bank of Hyderabad. The period of the study for evaluation of performance is from 1980 to 1993-94, a little more than a decade. In this study, Athma outlined the Growth and Progress of Commercial Banking in India and. analyzed the trends in deposits, various components of profits of SBH, examined the trends in Asset structure, evaluated the level of customer satisfaction and compared the performance of SBH with other PSBs, Associate Banks of SBI and SBI. Statistical techniques
List of abbreviations List of tables Acknowledgements Abstract 1. 2. 3. 4. 5. 6. 7. 8. Introduction Problem statement Objectives and hypothesis of the study Literature review Structure and performance of the financial sector in
institutions. It has accommodated the financial needs of the government, public enterprises and private sectors (Khan, 1995; Khan and Khan, 2007). Public sector dominancy, among others, lead to inefficiency in the banking sector (Haque, 1997). The economic efficiency of the banks remained low that led to low savings and investment in the private sector which resulted in low growth
The main goal of this section is to provide a review on literature and related models to the research problem. Generally, there are numerous empirical analyses by international scholars about assessing and measuring competitiveness of commercial banks. However, there is no any study related to this problem in Vietnam.