The Relationship between Bank Profitability and Micro Variables with Particular Emphasis on Bank Type: The Case of Northern Cyprus

Abstract

Given the fact that profitability is vital for sustainability, the main aim of this study was to determine the relationship between bank profitability and micro variables, with particular emphasis on bank type for the banking sector of Northern Cyprus. Cross-tabulation was applied to examine whether different bank types reveal similar levels of profitability. The profitability of the Northern Cyprus banking sector was profitable, even though real growth rates were negative during the periods concerned. However, the profitability of branch banks and foreign-capitalized banks was found to be higher for structural, managerial, technical and economic reasons. The banking sector of Northern Cyprus has stable profitability. Because of their unique characteristics, different bank types naturally have dissimilar profitability structures. Furthermore, equity, personnel expenses, non-performing loans and total deposits are negatively correlated with profitability, while total loans are positively correlated with profitability.