Bank Profitability Research Articles

Liquidity hoarding and bank profitability: The role of economic policy uncertainty

We examine the relation between liquidity hoarding and bank profitability in the context of economic policy uncertainty (EPU). Using data on bank liquidity hoarding from Berger et al. (2022), we find that liquidity hoarding is negatively associated with profitability when EPU is low, but positively associated with profitability when EPU is high. Our results hold both in normal and crisis periods, and for banks of different sizes.

Optimization of Islamic Bank Profitability: Overview of Capital, Liquidity, Operational Efficiency and Problem Financing

Optimization of Islamic Bank Profitability: Overview of Capital, Liquidity, Operational Efficiency and Problem Financing

Negative Interest Rate Policies: A Survey

This article surveys studies on the impact of central bank negative interest rate policies (NIRP). It reviews recent research on the effects of NIRP on financial markets, banks, households, firms, and the macroeconomy. Overall, policy rate cuts when interest rates are negative propagated along the yield curve, with the first policy cut below zero contributing significantly to the fall in longer-term yields. Lending and deposit rates also decreased following the adoption of NIRP. Based on the experience so far, bank lending volumes rose, and bank profits did not significantly deteriorate, although there was considerable heterogeneity in the effects. The impact of NIRP on inflation and output appears to have been comparable to that of conventional interest rate cuts.

Pengaruh pembiayaan Mudharabah,Murabahah dan Musyarakah Terhadap Bank Umum Syariah dengan NPF sebagai Variabel Moderasi

The research conducted analyzes the impact of Mudharabah, Murabahah and Musyarakah financing on the profitability of Islamic commercial banks during the period from 2016 to 2020. In this analysis, NPF was used as a moderating variable. Quantitative methods were adopted to analyze monthly time series data from 2016 to 2020, which was accessed via the OJK statistical database. The sample selection process was purposive sampling, referring to certain criteria, with a total of 120 samples examined over the five years. This research uses multiple linear regression analysis method which is conducted through SPSS application to process the data. This research helps to highlight factor affecting the Financial Perfomance of Islamic Banks. The findings of this research can provide valuable information to decision makers in Islamic banks to design more optimal financing strategies and improve credit risk management through a deeper Understanding the relationship between financing and profitability.. The results of this analysis show a significant positive influence between Mudharabah, Murabahah and Musyarakah financing on profitability, which mainly affects ROA in Sharia commercial banks. Although NPF does not significantly moderate the relationship between Mudharabah and ROA, this research reveals the important role of NPF in moderating the impact of Murabahah and Musyarakah financing on ROA.

Analisis Profitabilitas dengan Penyaluran Kredit Sebagai Variabel Intervening pada Perusahaan Perbankan di Bursa Efek Indonesia

This research aims to determine the profitability of banks which is influenced by several factors. While this research uses purposive sampling with the analysis technique of Statistical Package for the Social Sciens and Path Analysis. The results of this study conclude: Capital Adequacy Ratio has a negative contribution to the level of bank profitability. The ratio of third party funds has a contribution to the level of bank profitability. Capital Adequacy Ratio has a negative contribution to Banking Credit Distribution (LDR, Third Party Funds Ratio (TPF) has a contribution to Banking Credit Distribution. Capital Adequacy Ratio has a contribution to the level of Banking Profitability by Lending as Intervening. Third Party Funds Ratio has a contribution to the level of Banking Profitability by Lending as Intervening Credit has a negative contribution to the level of bank profitability.

THE EFFECT OF FINANCING ON PROFITABILITY OF ISLAMIC BANKS: AN ANALYSIS BEFORE AND DURING PANDEMIC

The study aims to examine the effect of sharia financing on the profitability of islamic banks. Sharia financing is measured from the financing most widely used by sharia banks, namely sales and purchase financing and profit sharing financing, while profitability is measured using ROA. This study uses a quantitative method with a comparative descriptive approach. The results of the study before Covid-19 showed that sales and purchase financing had a significant positive effect and profit sharing financing had a significant negative effect on profitability. While during Covid-19, the results of the study showed that sales and purchase financing had a positive but insignificant effect and profit sharing financing did not have a negative effect on profitability. This influence can be interpreted that the more the sales and purchase financing increases, the more profitability will increase, conversely, the more the profit sharing financing increases, the profitability of sharia banks will decrease.

Enhancing Internal Factors Unlocks Profit in Saudi Banks

General Background: Banks' profitability is crucial for financial stability and economic growth. Specific Background: Internal factors such as capital adequacy, asset quality, and management effectiveness play a significant role in determining profitability. However, the impact of these variables on Saudi banks needs further exploration. Knowledge Gap: Existing research lacks a comprehensive analysis of how these internal variables affect the profitability of Saudi banks over a long period. Aims: This study examines the effect of changes in capital adequacy, asset quality, management effectiveness, and liquidity on the bank profit index, measured by the return on assets (ROA) at Saudi Fransi Bank from 2000 to 2022. Results: Quantitative analysis reveals that capital adequacy and asset quality have a significant positive impact on ROA, with 1% increases in each leading to 20% and 76% increases in ROA, respectively. In contrast, increased liquidity and management inefficiency negatively affect ROA, decreasing it by 33% and a significant margin, respectively. The internal variables account for about 96.4% of the variation in profitability. Novelty: This study offers a detailed long-term analysis of internal factors affecting bank profitability in Saudi Arabia. Implications: Enhancing asset quality and management effectiveness is crucial for improving profitability and reducing costs, benefiting both Banque Saudi Fransi and the broader banking sector. Highlights: Positive Impact: Capital adequacy and asset quality enhance bank profitability. Negative Impact: Higher liquidity and management inefficiency reduce profitability. High Explanatory Power: Internal variables explain 96.4% of profitability variation. Keywords: Bank Profitability, Return on Assets, Capital Adequacy, Asset Quality, Management Effectiveness

Impact of Operating Efficiency on Profitability of Nepalese Commercial Banks

The study examines the effect of operating efficiency on the profitability of Nepalese commercial banks. Return on assets and return on equity are selected as the dependent variables. The selected independent variables are capital adequacy ratio, operating expenses, net interest income, leverage, loan to deposit ratio and bank size. The study is based on secondary data of 16 commercial banks with 112 observations for the period from 2015/16 to 2021/22. The data were collected from Banking and Financial Statistics published by Nepal Rastra Bank, publications and websites of Nepal Rastra Bank (NRB) and annual reports of the selected commercial banks. The correlation coefficients and regression models are estimated to test the significance and importance of operating efficiency on the profitability of Nepalese commercial banks. The study showed that capital adequacy ratio has a positive impact on return on assets and return on equity. It means that increase in capital adequacy ratio leads to increase in return on assets and return on equity. Similarly, operating expenses has a negative impact on return on assets and return on equity. It means that increase in operating expenses leads to decrease in return on assets and return on equity. Further, the study showed that net interest income has a positive impact on return on assets and return on equity. It means that increase in net interest income leads to increase in return on assets and return on equity. Likewise, leverage has a negative impact on return on assets. It means that increase in leverage ratio leads to decrease in return on asset. Furthermore, loan to deposit ratio has a negative impact on return on asset and return on equity. It indicates that increase in loan to deposit ratio leads to decrease in return on asset and return on equity. In addition, bank size has a negative impact on return on assets and return on equity. It shows that larger the bank size, lower would be the return on assets and return on equity.

Impact of Firm Size and Capital Structure on the Profitability of Nepalese Commercial Banks

The study examines the impact of firm size and capital structure on the profitability of Nepalese commercial banks. Return on equity and return on assets are selected as the dependent variables. The selected independent variables are debt to equity ratio, debt to assets ratio, capital adequacy ratio, loan to deposits ratio, assets tangibility and firm size. The study is based on secondary data of 13 commercial banks with 104 observations for the period from 2014/15 to 2021/22. The data were collected from Banking and Financial Statistics published by Nepal Rastra Bank, publications and websites of Nepal Rastra Bank (NRB) and annual reports of the selected commercial banks. The correlation coefficients and regression models are estimated to test the significance and importance of firm size and capital structure on the profitability of Nepalese commercial banks. The study showed that capital adequacy ratio has a positive impact on return on assets. It means that increase in capital adequacy ratio leads to increase in return on assets. Likewise, debt to equity ratio has a negative impact on return on assets and return on equity. It means that increase in debt-to-equity ratio leads to decrease in return on assets and return on equity. Further, this study showed that assets tangibility has a positive impact on return on assets and return on equity. It means that increase in assets tangibility leads to increase in return on assets and return on equity. Moreover, firm size has a positive impact on return on equity. It indicates that increase in firm size leads to increase in return on equity. Similarly, debt to assets ratio has a positive impact on return on equity. It means that increase in debt to assets ratio leads to increase in return on equity.

Financial Technology as a Basis for Financial Inclusion and its Impact on Profitability: A Case of Nepalese Commercial Banks

This study examines the impact of financial technology as a basis for financial inclusion on the profitability of Nepalese commercial banks. Return on assets and return on equity are selected as the dependent variables. Similarly, number of ATMs, number of branches, debt to assets ratio, credit to assets ratio, credit to deposit ratio and deprived sector lending are selected as the independent variables. This study is based on secondary data of 16 commercial banks with 112 observations for the study period from 2015/16 to 2021/22. The data were collected from Banking and Financial statistics published by Nepal Rastra Bank, reports published by the Ministry of Finance, and annual reports of respective banks. The correlation coefficients and regression models are estimated to test the impact of financial technology on the profitability of Nepalese commercial banks. The results showed that number of ATMs of a bank has a positive effect on return on assets and return on equity. This implies that increase in the number of ATMs of the bank leads to increase in return on assets and return on equity. Likewise, number of branches of a bank has a positive effect on return on assets and return on equity. This implies that increase in the number of branches of the bank leads to increase in the return on assets and return on equity. Similarly, debt to assets ratio has a positive effect on return on assets and return on equity. This indicates that higher the debt to assets ratio, higher would be the return on assets and return on equity. Likewise, credit to deposit ratio has a negative effect on return on assets and return on equity. This indicates that higher the credit to deposit ratio, lower would be the return on assets and return on equity. Similarly, credit to asset ratio has a negative effect on return on assets and return on equity. This indicates that higher the credit to asset ratio, lower would be the return on assets and return on equity. Furthermore, deprived sector lending has a negative effect on return on assets and return on equity. It implies that higher the deprived sector lending of a bank, lower would be the return on assets and return on equity.

Are Islamic banks really resilient to crises: new evidence from the COVID-19 pandemic

Purpose Proponents of Islamic banking believe that this banking model is relatively superior in times of financial crises. This study aims to examine whether Islamic banks were more resilient to the coronavirus 2019 (COVID-19) pandemic than their conventional peers, especially in terms of two of the most important banking risks, capital and liquidity risks. Design/methodology/approach The authors use a regression model to examine whether Islamic banks were more resilient to the recent health crisis, as compared to their conventional counterparts. The results are robust to alternative crisis time periods, the use of different model specifications and the inclusion of different control variables. Findings Unlike during the 2007–2008 global financial crisis (GFC), Islamic banks have not performed relatively well during the more recent crisis caused by the COVID-19 pandemic. The results show that Islamic banks experienced an increase in both capital and liquidity risks. The results also indicate a decrease in bank profitability, improved solvency and asset quality and a decrease in operational risk. Originality/value This study contributes to the literature on banking business model and resilience to economic crises. Contrary to some expectations and to their performance during the GFC of 2007–2008, Islamic banks were found to be more vulnerable during the COVID-19 pandemic than conventional banks.

Impact of Corporate Governance on Market Price of Share and Stock Return in Nepalese Commercial Banks

This study examines the effect of corporate governance attributes on market price of share and stock return in Nepalese commercial banks. The dependent variables are market price of share and stock return. Similarly, the independent variables are company size, board size, board diversity, audit committee, non-performing loans, profitability and leverage. The study is based on secondary data of 15 commercial banks with 105 observations for the period from 2015/16 to 2021/22. The data were collected from Banking and Financial Statistics published by Nepal Rastra Bank, publications and websites of Nepal Rastra Bank (NRB) and annual reports of the selected commercial banks. The correlation coefficients and regression models are estimated to test the significance and importance of corporate governance on the market price of share and stock return of Nepalese commercial banks. The study showed that audit committee size has a positive effect on stock return. It means that increase in audit committee size leads to increase in stock return. However, leverage ratio has a negative effect on stock return. It means that increase in leverage ratio leads to decrease in stock return. Similarly, profitability has a positive effect on market price of share and stock return. It means increase in bank profit leads to increase in market price of share and stock return. Similarly, board diversity has a positive effect on market price of share and stock return. It implies that increase in female board directors leads to increase in market price of share and stock return. However, nonperforming loans has a negative effect on market price of share. It implies that increase in nonperforming loans leads to decrease in market price of share. Similarly, board size has a positive effect on market price of share and stock return. It means increase in board size leads to increase in market price of share and stock return.

Analisis Peran Laba Pembiayaan (Akad Mudharabah dan Musyarakah) Terhadap Profitabilitas Bank Syariah Indonesia: Studi Banding dengan Profitabilitas Bank Konvensional KBMI III Periode 2021-2023

This research aims to analyze the effect of mudharabah and musyarakah financing profits on BSI Bank profitability as well as a comparative study of the profitability of KBMI III Conventional Banks for the 2021-2023 period. The sample in this study used a proportionate stratified random sampling technique which took profit data on mudharabah and musyarakah financing at Bank Syariah Indonesia and profitability data (ROA) at Bank Syariah Indonesia, Bank BTN, Bank Permata and Bank CIMB Niaga for the 2021-2023 period. The analytical tool used is multiple linear regression analysis using the SPSS V21 application. The research results showed that the mudharabah financing profit variable had a negative and significant effect on profitability and the musyarakah financing profit variable had a positive and significant effect on profitability, while the test results of mudharabah and musyarakah financing profits together had a positive and significant effect on profitability. The results of different test research show that in general the ROA of Bank BSI is better than that of conventional Bank KBMI III.

Analysis of the Influence of Mobile Banking on the Profitability Level of Sharia Banks in Indonesia in 2019-2023

The aim of this research is to determine the effect of mobile banking on the level of Return On Assets (ROA) of Islamic banks in Indonesia in 2019-2023. The rise and fall of ROA is caused by unstable profits and total assets. This research uses quantitative research, and the data source uses secondary data in the form of a time series of 20 samples. Data analysis techniques use descriptive statistical test techniques, normality test, hypothesis test (t test), coefficient of determination test (R Square), and simple linear regression analysis. Data processing uses the SPSS Version 23 program. The research results show that the mobile banking variable has a partial effect on the profitability of Islamic banks in Indonesia in 2019-2023. This can be proven by the results of the t test analysis showing that the e-banking variable has t count gt; t table, thus e-banking has an effect on the profitability of Islamic banks in Indonesia in 2019-2023.Keywords: Mobile Banking, Profitability

Analyzing the Determinants of Banking Profitability in European Commercial Banks: Do COVID-19 Economic Support Measures Matter?

Analyzing the Determinants of Banking Profitability in European Commercial Banks: Do COVID-19 Economic Support Measures Matter?

Research on the Impact of Digitalization on Bank Performance Based on BP Neural Network

With the promotion and development of digital finance, the degree of digitalization has an increasingly significant impact on the banking business, which cannot be ignored in the operation of commercial banks. Therefore, establishing a digitalization bank profitability system model is of great significance for the sustainable development of banks and digital finance. This article selects 6 Chinese state-owned banks from 57 listed banks in the A+H stock market as samples, constructs a digital indicator system and evaluation model for banks through the literature review method, and uses simulation training to explore the effectiveness of BP neural network in evaluating the impact of digitalization on bank profitability. The aim is to provide a reference for the evaluation of financial statement information of other banks and other factors affecting bank digitalization. The innovation of the article lies in the innovative use of the entropy weight coefficient of variation method to establish a digital evaluation system model, which utilizes the data itself to objectively establish an evaluation system, incorporate the established digital system into the black box model of the BP neural network model to study the impact of changes in digitalization on banking operations.

ANALSIS KOMPARASI KINERJA KEUANGAN BANK MEGA SYARIAH MENGGUNAKAN METODE RGEC PADA MASA SEBELUM DAN SELAMA PANDEMI COVID-19

The COVID-19 pandemic has had an impact on all industrial sectors in Indonesia, one of which is the sharia banking sector. During the pandemic, banking performance experienced fluctuations in terms of deposits and debt financing; Bank Mega Syariah also experienced fluctuations in financial ratios and deposits, which could have an impact on the bank's financial performance. The purpose of this study is to evaluate Bank Mega Syariah's financial results utilizing the RGEC approach both before and after the COVID-19 epidemic. This study used quantitative research using a descriptive methodology. Data was acquired through the use of documentation methods. Financial ratio analysis utilizing the RGEC method is the data analysis method employed. The findings demonstrate that Bank Mega Syariah's financial performance, as measured by the RGEC technique, was superior to its pre-COVID-19 pandemic financial performance during the pandemic-affected period. This is shown by Bank Mega Syariah's ability to continue turning in a profit despite the COVID-19 pandemic's negative impact on the business environment. This accomplishment is demonstrated by the growth in several key business metrics, which were maintained, including bank profitability, finance distribution, and Third Party Funds.Keywords: Financial Performance; Bank Health Level; RGEC Method

Internal and External Factors on Profitability of Islamic Banks in Indonesia Mediated by Operating Expenses Operating Income (Period 2013 to 2023)

Lucrativeness is a vital element for evaluating Islamic banks' monetary achievement. It's critical to grasp the determinants that influence Indonesian Islamic banks' lucrativeness. The objective of this examination is to explore the factors—such as problematic financing, financing to store ratio, currency rates, price rises, and operational proceeds as an intermediary variable—that impact the productivity of Islamic banks in Indonesia. This research intends to provide choice makers in the Islamic fiscal industry a more comprehensive discernment of the budgetary operation of Islamic banks by scrutinizing these guidelines. This research methodology uses a panel data approach using secondary data from Islamic banks in Indonesia. Through panel data analysis, this study examines the effect of these variables on the profitability of Islamic banks. The conclusions showed that, in Sub-structural I, Financing to Deposit Proportion (FDR) favorably affects the productivity (ROA) of Indonesian Islamic banks, while Non-Performing Financing (NPF), Currency Ratios, and Rising Prices have no consequence on operational expenses operational proceeds (BOPO). As indicated by sub-structural II, profitability is impacted by inside factors (NPF and BOPO), outer variables (expansion and cash rates) have no significant effect on productivity, and financing to store proportion (FDR) has no impact on productivity. In this examination, the BOPO fills in as a mediating variable that just intercedes the effect of the Financing to Deposit Ratio on Lucrativeness. Concerning the other autonomous factors, it has no bearing. Other than featuring the significance of hazard relief and operational effectiveness in accomplishing positive monetary outcomes, this exploration illuminates the variables influencing the productivity of Islamic banks in Indonesia.

Assessing Non-Performing Assets and Their Impact on Bank Profitability: A Comparative Analysis of HDFC Bank and ICICI Bank

Non-Performing Assets (NPAs) significantly affect the stability and profitability of banks by reducing income and increasing provisioning requirements. This study investigates the impact of NPAs on bank performance, with a specific focus on HDFC Bank and ICICI Bank. Utilizing secondary data from 2019 to 2023, the research analyzes key metrics including Gross NPA Ratio, Net NPA Ratio, Provision Ratio, and Problem Asset Ratio. Findings reveal that HDFC Bank maintains superior performance with lower NPAs and more conservative provisioning compared to ICICI Bank. The study highlights the broader economic implications of NPAs and offers recommendations for improving NPA management. This research contributes valuable insights into effective strategies for managing NPAs and enhancing bank profitability.

Capital Adequacy and Bank Profitability: the Moderating Effect of Macroeconomic Variables

Based on earlier research, two primary categories of characteristics influence bank profitability. First, each bank has a unique set of profitability drivers that are often the direct outcome of management choices (quality, size, capitalization, efficiency, asset structure, and revenue divergence). The second group of determinants consists of elements like industry concentration, economic growth, inflation, and interest rates related to the profitability of the industry formation and the macroeconomic environment in which the banking system conducts. Capital adequacy may be defined as the ratio of the institution’s main capital to its assets, including loans and investments, to gauge a financial institution’s stability and strength. This paper examines the correlation between capital adequacy and banks’ profitability through the moderating impact of macroeconomic variables like inflation, interest rates, and exchange rates in the banking sectors of Malaysia, Indonesia, and Turkey. To this end, panel data were gathered from the OIC statistics database concerning 2010 and 2021. The study’s regression analysis exposed that although inflation has a significant negative influence on banks’ profitability, while the capital adequacy ratio, exchange rate, and interest rate have positive and significant impacts. Regarding the moderating effect, both inflation and interest rates have a significant positive and negative impact on the relationship between banks’ profitability and capital adequacy, respectively. Additionally, macroeconomic variable interactions with capital adequacy are not statistically significant.