Bank Profitability Research Articles

Pengaruh Adopsi Financial Technology Terhadap Profitabilitas Bank Umum Konvensional yang Terdaftar di Otoritas Jasa Keuangan Periode 2017-2022

This research aims to analyse the effect of financial technology (fintech) adoption on the profitability of conventional commercial banks registered with the Financial Services Authority for the period 2017-2022. This research is an associative research with a quantitative approach. The data collection method is a survey sample. The population in the study amounted to 93 banks. By using purposive sampling technique, 5 bank samples were obtained (30 observation data). Fintech services in this study are measured using Automated Teller Machine (ATM), internet banking and mobile banking. While profitability is measured using Return On Asset (ROA). The panel data analysis method in this research is multiple linear regression analysis using Eviews version 12. The results of this research indicate that Automated Teller Machine (ATM) has a positive and insignificant effect on ROA, internet banking has a negative and insignificant effect on ROA and mobile banking has a positive and significant effect on ROA.

Liquidity Risk Management and Profitability in Egyptian Banking: A Comparative Study of Public and Private Banks

Liquidity Risk Management and Profitability in Egyptian Banking: A Comparative Study of Public and Private Banks

Assessing the impact of environmental component on the development of Russian banks applying ESG policy

Subject. The article discusses operations of steadily developing Russian banks in the context of environmental component. Objectives. The aim is to identify patterns in functioning of Russian banks, applying ESG policy in their activities, under the influence of environmental factors, to improve the management of their development. Methods. The study employs regression analysis. We selected 26 Russian banks based on ESG ratings, formed an empirical base for 2011–2020 from open sources (financial and economic indicators and macro-level indicators characterizing the environmental impact by the activities of economic entities), built a linear regression model in MS Excel. Results. The constructed regression model helped reveal that the indicator “Recycling and disposal of production and consumption waste in the Russian Federation” has a significant positive impact on the pretax profit of banks applying ESG policy. However, a negative trend in the impact of banks on the environment was identified in terms of connection between the resulting indicator and the indicator “Primary energy intensity level”. This suggests that the internal capacity of banks to implement the environmental component is not sufficiently developed and used. Conclusions. The findings can be used both at the macro and micro level when generating the strategy and tactics for ESG banking development. The offered regression modeling technique can be used to analyze the role of environmental component in the activities of banks in other countries, which implement ESG policy.

The Relationship between Electronic Marketing and Consumer Behavior "An Applied Study on a Sample of Customers of Al-Rafidain Bank – Iraq"

The current research aims to understanding the relationship between e-marketing and consumer behavior through study applied to a sample of Rafidain Bank customers, and the current research focuses on surveying the opinions of a sample of customers dealing with Rafidain Bank in three Iraqi governorates (Babil, Karbala, and Najaf), numbering (325) Customers. the researcher examined, through a set of hypotheses, the effects of the independent variable, which is electronic marketing, on consumer behavior, and consequently the effects of the latter on the bank’s profitability. A questionnaire was designed to survey the opinions of the individuals in the aforementioned research sample, according to a scale to be respected the quintet, and these phrases included five axes distributed between the study variables, demographic information of the study sample, elements of electronic marketing, elements supporting electronic marketing, indicators of the efficiency of banking services, and finally consumer behavior. The descriptive analysis resulted in tables that displayed the initial statistical results and analytical results that address the research hypotheses, whether negative or positive. the study reached the following conclusions the most important of which is that The dimensions of consumer behavior are arranged as follows: education, attitudes, perception, motives, and finally, the study proved the existence of a strong relationship between the independent variable and the mediator on the bank's profitability clearly, so the recommendations were confirmed that this relationship should be under the attention of the relevant parties in the upper and middle management and that they should take it into account when working on developing the marketing mix strategies for banking services at Rafidain bank to enhance its pioneering role in banking work at the level of Iraq and the world.

The influence of solvency and liquidity ratios on profitability of Tunisian banks: the moderating effect of asset quality

The influence of solvency and liquidity ratios on profitability of Tunisian banks: the moderating effect of asset quality

Corporate Governance, Market Competition and Performance of Indian Banks

The purpose of the study is to determine how market competition and corporate governance affect bank performance (measured by profitability and asset quality). Additionally, it seeks to determine how market competition influences the governance and performance link in Indian banks between 2005 and 2022. The study primarily employs a technique of two-step system generalized method of moments, and a propensity score matching technique is applied to support our investigation. The study shows that adhering to corporate governance standards enhances bank profitability and decreases non-performing assets in India, while market concentration adversely impacts bank performance. Furthermore, the study indicates that corporate governance is more significant in low-market competition environments. The study reveals an intriguing ‘substitutive’ link between market competitiveness and corporate governance. Finally, it concludes that effective governance practices such as an effective board, transparency, board committees and shareholder rights are crucial during periods of declining profitability, poor asset quality and bank mergers.

Empirical research on the impact of green credit development on the profitability of commercial banks

This paper examines empirical research on the impact of green credit development on commercial banks’ probability. To promote the green transformation of the economy, the efficient use of resources, and the effective improvement of the ecological environment, it is necessary to vigorously promote the comprehensive development of green finance and the continuous improvement of the green financial system. In terms of improving the green financial system, efforts can start with green credit. This paper uses related data from 10 Chinese listed commercial banks from 2012 to 2020 as panel data, and employs Stata software for empirical research and analysis. The final empirical results show that launching a green credit business may, in the short term, lead to a decrease in the bank's profitability. The reason for this result may be that China has started developing green finance relatively late and for a shorter duration, so the time and number of entities selected for data are very limited. Moreover, the expansion of the green credit business means that while suppressing "two highs and one surplus" enterprises, it also leads to a significant reduction in their loans, thus affecting the profitability of commercial banks. Ultimately, we propose targeted suggestions that align with China’s national conditions and enhance the green credit system.

Analyzing the Impact of Cost of Funds and Non-Performing Loans on Bank Profitability

The research was conducted to see how cost of funds (COC), and non-performing loans (NPL) on profitability is measured by return on assets (ROA). The research method used is descriptive and verification methods. Secondary data is sourced from Regional Development Banks of West Java and Banten Provinces in Indonesia quarterly financial reports for 2014 – 2022, while the data analysis technique uses multiple linear regression analysis. The results of the research are that COF and NPL has a negative and significant effect on ROA. Simultaneously, COF and NPL have a significant effect on ROA. The results of this research are useful for bank management in determining funding strategies with low cost of funds, and credit management strategies so that non-performing remains healthy.

Navigating crisis: marketing dynamics and resilience in the MENA’s dual-banking system amidst the SAR-COV-2 pandemic

In this paper, we investigate how market concentration and efficiency impact banks’ performance and stability during the SAR-COV-2 pandemic. There is a research gap in the empirical literature in understanding the specific impact of market concentration and efficiency on the profitability and risk-taking behavior of banks, particularly in the developing context of the Middle East and North Africa (MENA) region. To address this gap, we examine the relationship between market concentration, efficiency, and bank performance using a comprehensive dataset encompassing 575 banks across 20 MENA countries from 2006 to 2021. Specifically, we examine the market dynamics and performance of different banking systems co-existing in the MENA region. Our findings indicate that prior to the pandemic, both conventional and Islamic banks benefited from enhanced financial stability as a result of the increased market concentration and efficiency. However, during the pandemic, the positive effects of efficiency and concentration were primarily observed within the group of Islamic banks. Furthermore, we provide new evidence for the moderating effect of market concentration, with a significant negative impact suggesting that increased market competition reinforces the efficiency effect during the pandemic. Our findings are important for policymakers and regulatory authorities in the MENA region as they indicate the need for new policies that assign a more significant role to Islamic banking in the post-SAR-COV-2 recovery.

Profitability of Bank of Baroda: An Analysis

One of the industries in India with the highest growth is the banking sector. The banking industry is getting more complex today. In India, there are various banking organizations in operation. Bank of Baroda, the second- largest public sector bank, is the current choice. The study's goal is to anayse the Bank of Baroda's financial situation and performance both before and after the bank's merger. Bank profitability can be measured in a variety of ways, including WACC, regression analysis, the CAMEL model, and DuPont analysis. The study has used the DuPont model, which analyses the profitability of banks from each of the key parameters such net profit margin, assets turnover, and equity multiplier, since it makes it simple to analyze the profitability of businesses. Key words: DuPont model, Bank of Baroda, Profitability.

Indonesian Islamic Banks’ Post-Pandemic Profitability Alignment with Sustainability Goals

Purpose — The Islamic banking sector in Indonesia has recovered from the COVID-19 pandemic. Despite the sector’s resilience to the crisis, Islamic banks have lower levels of profitability than their conventional counterparts. They therefore need to optimise profitability as well as implement sustainability practices due to their high reliance on income from intermediary functions and their core principle of protecting life and preventing harm. This study aims to optimise the post-pandemic profitability of Indonesian Islamic banks while seeking to align profitability with sustainable development goals (SDGs). Design/Methodology/Approach — The model is developed based on the combination of linear programming and financial analysis, with constraints considering banking regulations and practices. The model highlights financing product types, financing fields of business, and types of deposit products that contribute to higher profits and support sustainability practices. Findings — The recommended financing product types, financing fields of business, and deposit product types lead to profitability growth of up to 85 per cent, even better than the pre-pandemic performance of Islamic banking and the overall Indonesian banking industry. This research also finds that Islamic banks’ strategy for profit optimisation is consistent with the increasing support for SDGs. Originality/Value — There is a lack of literature discussing the alignment of Islamic banks’ profit optimisation with the SDGs. This study contributes to the literature by aligning the Islamic banks’ profitability strategy with sustainable financing. Research Limitations/Implications — The study is expected to promote the implementation of sustainability practices as well as increase the profitability of Islamic banks, drawing from evidence in Indonesia.

The Influence of Murabahah, Musyarakah, Mudharabah and Qardh on the Profitability of Islamic Commercial Banks

This research aims to determine how the effect of Murabahah, Musyarakah, Mudharabah and Qardh financing on profitability at Islamic Commercial Banks for the period 2017-2021. The research method used in this research is quantitative research method. The data collection method was carried out through documentation using secondary data taken from the financial statements of each Islamic commercial bank in 2017-2021. The sampling method used purposive sampling technique with the analysis technique used was multiple linear regression using the SPSS version 26 application. The results showed that none of the Murabahah variables had an effect on profitability. Musyarakah variable has a negative and significant effect on profitability. Meanwhile, Mudharabah and Qardh variables have a positive and significant effect on profitability. The managerial implication is that Murabahah as the type of financing most often used by Islamic banks provides a relatively stable fixed income because it uses the principle of a fixed margin agreed upon in advance. Musharakah involves joint capital participation between the bank and the customer, where the bank gets a share of the profits or bears the losses according to the agreement. The bank acts as the capital owner (shahibul maal) who hands over funds to the business manager (mudharib) and gets a share of the profits.

Islamic Banks’ Profit and Violations in Murābaḥah Financing

Purpose — This paper investigates the relationship between murābaḥah contracts and the profitability of Islamic banks, explicitly examining how potential Sharīʿah non-compliance issues related to murābaḥah contracts might impact the banks’ profitability. Design/Methodology/Approach — Employing the Generalised Method of Moments (GMM) estimation for fixed effects dynamic panels, this study analyses quarterly data from 2013Q4 to 2023Q1 of the four largest Islamic banks in Saudi Arabia. Findings — The results reveal a positive correlation between the increase in the value of murābaḥah contracts and Islamic earnings. While domestic macroeconomic conditions influence this relationship, international conditions have minimal impact. This investigation meticulously identifies instances of Sharīʿah violations within Islamic banks as they pursue a ‘search for yield’. Originality/Value — Prior studies have fallen short in establishing a definitive association between the profits of Islamic banks and the value of murābaḥah contracts. This research bridges this gap and introduces a novel dimension to the existing literature by illuminating the potential compromises in Sharīʿah compliance when employing murābaḥah contracts. The dual focus on both financial implications and ethical considerations makes this study unique, representing a significant contribution to the ongoing discourse in Islamic finance literature. Research Limitations/Implications — The availability of data on murābaḥah contracts may pose constraints to this study. Practical Implications — The analysis sheds light on various scenarios where Islamic banks may compromise their adherence to Sharīʿah principles in pursuit of higher profits, offering valuable solutions to address and rectify such violations.

How Does Macroprudential Policy Impact Bank Risk-Taking and Profitability: Evidence from Indian Commercial Banks

ABSTRACT This study analyses the impact of macroprudential policy (MaPP) on Indian banks’ risk-taking and profitability. Using commercial bank data from 2004–05 to 2019–20, the risk-taking is measured by Z-score, and loan loss provision and profitability by return on average assets and return on average equity, respectively. Employing the panel system-GMM technique, the study finds. (1) MaPP mitigates bank risk-taking by enhancing the bank’s stability and reducing the procyclicality of loan loss provisions. (2) MaPP is found to have a positive impact on bank profitability. (3) MaPP is found to be more effective in the context of private and foreign banks as compared to nationalized banks. (4) Within the macroprudential toolkit, reserve requirements and risk-weights are found to have a positive impact on risk-taking and profitability, whereas provisioning requirements are found to have a negative impact.

The importance of using technology in financial operations to further improve banks’ profitability

The study aimed to determine the status of technology use and financial operations performance and its impact on profitability indicators. Is there interest in technology among banks and to what extent are banks able to provide advanced services and keep pace with developments? The major developments in modern technology have contributed to the application of modern methods of dealing with customers and banks. These recent changes have made it necessary for Iraqi banks to advance the reality of technology and the performance of financial operations to improve profitability in banks. It has also clarified the importance of using technology and banking services and the role they play in serving customers by taking advantage of these technological developments. This study assumes that the use of technology and the performance of financial operations affect the indicators of banks' profitability. To prove the hypothesis of this study, the data shown by the questionnaire were presented and the sample responses were analyzed regarding the performance of financial operations and enhancing the bank's profitability using technology. Frequency distribution tables for the study variables were prepared and adopted for the purposes of the statistical analysis process to obtain the weighted arithmetic means, standard deviations, and the coefficient of variation, to know the impact of the variables. The study concluded that technological developments have been reflected positively in the banking sector. The researcher concluded the study with a set of suggestions and recommendations to develop and keep pace with technology to increase competition between banks, serve customers, and achieve profitability, including addressing the development of technology.

Does External Fintech Collaboration Improve the Profitability of Commercial Banks? - Micro-evidence from China's Listed Commercial Banks

Does External Fintech Collaboration Improve the Profitability of Commercial Banks? - Micro-evidence from China's Listed Commercial Banks

ANALISIS IMPLEMENTASI KEUANGAN BERKELANJUTAN TERHADAP PROFITABILITAS BANK

In practice, banks must maintain business continuity by paying attention to their profitability. However, in response to global issues related to sustainable development goals, banks are also obliged to direct their business towards sustainability by implementing sustainable finance. This study aims to further analyze how the implementation of sustainable finance, particularly sustainable lending and the realization of Environmental Social Responsibility (CSR) funds, can affect bank profitability. Economic sustainability theory emphasizes the importance of balance between economic, social, and environmental aspects. This study uses the panel data regression analysis method. The implementation of sustainable finance proxied by sustainable credit has a significant positive effect on bank profitability, while the realization of CSR funds has a significant negative effect on bank profitability. This research is expected to provide a more comprehensive insight into how banks can balance social responsibility and environmental sustainability with the need to maintain healthy profitability.

Negative rates and bank profit and cost efficiency: evidence for Eurozone

This paper studies the effect of Negative Interest Rates Policies (NIRP) on the performance of Eurozone Banks. To this end, we apply a stochastic frontier analysis (SFA) to a sample of 1446 banks from Eurozone countries for the time period 2010–2018 to explore how bank profit and cost efficiency are affected by NIRP. We find that NIRP has a positive effect on profit efficiency which is mainly attributed to banks’ efforts to counterbalance the squeezed interest margins by increasing their non interest income and we also demonstrate that smaller banks and banks facing higher competition are more incentivised to enhance their cost efficiency when they operate under NIRP.

Factors Contributing to Bank Profitability in the GCC Region during Global Financial and Non-Financial Crises

Factors Contributing to Bank Profitability in the GCC Region during Global Financial and Non-Financial Crises

The impact of liquidity risk and credit risk on bank profitability during COVID-19.

The COVID-19 outbreak caused a massive setback to the stability of financial system due to emergence of several other risks with COVID, which significantly influenced the continuity of profitable banking operations. Therefore, this study aims to see that how differently the liquidity risk and credit risk influenced the banking profitability during Covid-19 (Q12020 to Q42021) than before COVID (Q12018 to Q42019). The study employs pooled OLS, and OLS fixed & random effects models, to analyze the panel data on a sample of 37 banks currently operating in Pakistan. The results depict that liquidity risk has a positive and significant relationship with return on assets and return on equity, but insignificant relationship with net interest margin. Credit risk has a negative and significant relationship with return on assets, return on equity, and net interest margin. The study also applies quantile regression to address the normality issue in data. The quantile regression results are consistent with pooled OLS, and OLS fixed and random effects results. The study makes valuable suggestions for regulators, policymakers, and others users of financial institutional data. The current study will help to set policies for efficient management of LR and CR.