Determination of Income and Expense Items That Have a High Impact on The Profitability of Turkish Banks
Keywords:Turkish Banks; Profitability; Income and Expense Items; Engle Granger Cointegration; Toda Yamamoto Causality
Banks are one of the important actors of the financial system as they offer a variety of products and services depending on their field of activity. They collect funds from savers and transfers them to the segments in need. In this way, the banking sector ensures efficient use of the resources of the savers while fulfilling the needs of those with a fund deficit. Banks also enable the circulation of savings in domestic and foreign markets and contribute to trade. They increase the welfare of society through the efficient use of resources and meet the needs of individuals. Therefore, the existence of banks is vital for the economies. The purpose of this study is to identify income and expense items that have a high impact on determining the profitability of banks. Depending on this purpose, the income and expense items of Turkish banks are included in the scope of analysis. This data has been tested by Engle-Granger cointegration and Toda Yamamoto causality methods. According to the results of the analysis, the top priority item in determining the profitability of banks is the interests paid for the loans they used. Also, it has been identified that there is a long-term relationship between the interests gained from securities, interest on deposits, and net profit. Considering all these results, Turkish banks should first consider the interest rates they pay for the loans they use in order to ensure their profitability. Banks are required to ensure careful liquidity control and minimize the risks that may cause credit needs.
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