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How does ownership structure affect the profitability of Turkish banks? A comparative analysis of determinants
Article | Year: 2024 | Pages: 337 - 361 | Volume: 48 | Issue: 3 Received: November 4, 2023 | Accepted: April 9, 2024 | Published online: September 3, 2024
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FULL ARTICLE
FIGURES & DATA
REFERENCES
CROSSMARK POLICY
METRICS
LICENCING
PDF
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Public banks
|
Domestic private banks
|
Foreign banks
|
All deposit banks
|
|
|
2002
|
2010
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2021
|
2002
|
2010
|
2021
|
2002
|
2010
|
2021
|
2002
|
2010
|
2021
|
|
Average return
on equity (%)
|
50
|
17
|
15
|
20
|
18
|
20
|
33
|
17
|
19
|
23
|
18
|
18
|
|
Foreign currency
net general position / Equity (%)
|
2*
|
1
|
1
|
1*
|
0
|
10
|
4*
|
-1
|
9
|
0*
|
0
|
7
|
|
Average return
on equity (%)
|
16
|
23
|
6
|
16
|
18
|
18
|
6
|
11
|
17
|
8
|
18
|
14
|
|
Average return
on assets
|
2
|
2
|
0
|
2
|
2
|
2
|
1
|
1
|
2
|
1
|
2
|
1
|
|
Turkish lira deposits / Total deposits (%)
|
63
|
78
|
41
|
31
|
64
|
34
|
18
|
67
|
32
|
42
|
70
|
37
|
|
Turkish lira loans
/ Total loans (%)
|
75
|
79
|
69
|
34
|
65
|
62
|
44
|
82
|
58
|
43
|
72
|
64
|
|
Loans/Deposits
(L/D) (%)
|
22
|
70
|
88
|
43
|
90
|
89
|
73
|
106
|
89
|
35
|
80
|
89
|
|
Non-performing
loans (NPL) / Total Loans (%)
|
13
|
0
|
3
|
4
|
0
|
4
|
1
|
1
|
4
|
7
|
1
|
4
|
|
Interest income
/ Interest expenses (%)
|
131
|
184
|
147
|
144
|
200
|
186
|
234
|
252
|
209
|
137
|
202
|
170
|
|
Interest expenses
/ Total assets (%)
|
23
|
4
|
5
|
11
|
4
|
4
|
8
|
4
|
3
|
15
|
4
|
4
|
|
Interest income
/ Total revenue (%)
|
91
|
86
|
98
|
82
|
75
|
86
|
75
|
87
|
80
|
87
|
80
|
89
|
|
Interest expenses
/ Total expenses (%)
|
85
|
71
|
90
|
72
|
59
|
80
|
51
|
47
|
78
|
77
|
61
|
84
|
|
Liquid assets
/ Short-term liabilities (%)
|
56
|
45
|
24
|
80
|
57
|
34
|
80
|
62
|
42
|
74
|
54
|
32
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Total loans /
Total assets (%)
|
14*
|
48
|
58
|
32*
|
52
|
54
|
39*
|
58
|
56
|
54*
|
48
|
56
|
|
Total deposits
/ Total assets
|
72
|
77
|
66
|
70
|
62
|
61
|
52
|
58
|
58
|
70
|
66
|
64
|
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Net profit per
branch (million TL)
|
1
|
3
|
3
|
1
|
3
|
11
|
0
|
1
|
11
|
0
|
2
|
8
|
|
Employment (‘000)
|
40
|
47
|
62
|
67
|
84
|
66
|
5
|
42
|
52
|
118
|
173
|
180
|
|
Number of branches
per bank
|
673
|
915
|
1238
|
183
|
417
|
446
|
464
|
123
|
115
|
152
|
294
|
306
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Sources: The Banks Association of Turkiye 2002, 2010, 2021; Banking Regulation and Supervision Agency (BRSA); Banking Sector Data; Banking System in Turkiye (from
1958 to 2021).
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Notation
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Definition
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Source
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ROE
|
Return on equity (Net income / Total equity)*100
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TBA
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EQUITY
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The ratio of equity to total assets (Equity / Total assets)
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TBA
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NNI
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Non-interest income (Fees and commission income / Total
assets)*100
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TBA
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CUR
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Rate of capacity utilisation (%) (proxy for economic
growth on a monthly basis)
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CBRT
|
|
RER
|
Real effective exchange rate (2003=100)
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CBRT
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INF
|
Inflation rate (%)
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CBRT
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SIZE
|
Logarithm of the ratio of assets by ownership to total
assets (%)
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TBA
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CREDIT/DEPOSIT
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Loan-to-deposit ratio (Total loans / Total deposits)
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TBA
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Variable
|
N
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Mean
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Std. dev.
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Min
|
Max
|
|
ROE
|
468
|
8.4
|
5.7
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0.003
|
36.5
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EQUITY
|
468
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0.1
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0.02
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0.1
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0.15
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|
NNI
|
468
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12.2
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3.1
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6.1
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18.8
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|
CUR
|
468
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75.3
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3.7
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67.8
|
81.9
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|
RER
|
468
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95.1
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18.4
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53.5
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126.5
|
|
INF
|
468
|
15.2
|
16.9
|
3.9
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85.5
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SIZE
|
468
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13.3
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0.8
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11.5
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14.9
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CREDIT/DEPOSIT
|
468
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1.1
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0.2
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0.5
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1.2
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ROE1
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ROE2
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ROE3
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ROE1
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1.000
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|
|
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ROE2
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0.668
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1.000
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ROE3
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0.826
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0.908
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1.000
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|
Breusch-Pagan
test of independence: chi2(45) = 337.742
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Pr = 0.000
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Delta
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P-value
|
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∆
|
4.527
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0.000
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Adj-∆
|
4.665
|
0.000
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Equation
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RMSE
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R2
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Chi2
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Probability
|
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ROE1
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0.989
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0.717
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59.07
|
0.000
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ROE2
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0.735
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0.723
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62.82
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0.000
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|
ROE3
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0.739
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0.716
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51.78
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0.000
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Dependent variable
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Independent variables
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Coefficient
|
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Public
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Foreign
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Domestic private
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ROE
|
EQUITY
|
8.232
(5.542)
|
22.443***
(3.715)
|
9.377**
(4.101)
|
|
NNI
|
0.154**
(0.067)
|
0.029**
(0.015)
|
0.105***
(0.028)
|
|
CUR
|
0.049
(0.045)
|
0.077***
(0.018)
|
0.065***
(0.017)
|
|
RER
|
-2.159**
(1.036)
|
-3.135***
(1.353)
|
-3.047***
(1.026)
|
|
INF
|
-0.027***
(0.007)
|
-0.004*
(0.019)
|
-0.047**
(0.013)
|
|
SIZE
|
0.536**
(0.218)
|
-0.038
(0.112)
|
0.017
(0.272)
|
|
CREDIT/DEPOSIT
|
-2.053***
(0.725)
|
0.267*
(0.128)
|
-2.349***
(0.539)
|
|
Constant
|
3.428
(3.572)
|
14.761***
(4.551)
|
11.672*
(5.852)
|
|
Variable
|
Coefficient
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Standard error
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t-statistic
|
|
EQUITY
|
13.351
|
1.915
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6.972***
|
|
NNI
|
0.096
|
0.025
|
3.884**
|
|
CUR
|
0.064
|
0.017
|
3.719**
|
|
RER
|
-2.780
|
0.663
|
-4.193***
|
|
INF
|
-0.026
|
0.008
|
-3.242**
|
|
SIZE
|
0.172
|
0.122
|
1.407
|
|
CREDIT/DEPOSIT
|
-1.378
|
0.304
|
-4.532***
|
|
Constant
|
9.954
|
2.743
|
3.629**
|
|
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Fixed effects model
|
|
Dependent variable: ROE
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Coefficient
|
Standard error
|
|
EQUITY
|
8.404
|
(7.357)
|
|
NNI
|
0.163*
|
(0.063)
|
|
CUR
|
0.052
|
(0.047)
|
|
RER
|
-1.003**
|
(0.312)
|
|
INF
|
-0.021***
|
(0.002)
|
|
SIZE
|
0.423*
|
(0.218)
|
|
CREDIT/DEPOSIT
|
-0.631**
|
(0.211)
|
|
Foreign
|
9.193*
|
(4.582)
|
|
EQUITY*FOREIGN
|
22.63***
|
(3.722)
|
|
NNI*FOREIGN
|
0.021*
|
(0.063)
|
|
CUR*FOREIGN
|
0.051**
|
(0.147)
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|
RER*FOREIGN
|
-3.045*
|
(1.027)
|
|
INF*FOREIGN
|
-0.044**
|
(0.003)
|
|
SIZE*FOREIGN
|
0.219
|
(0.372)
|
|
CREDIT/DEPOSIT*FOREIGN
|
0.234*
|
(0.382)
|
|
Domestic
|
8.705*
|
(4.168)
|
|
EQUITY*DOMESTIC
|
9.412*
|
(0.482)
|
|
NNI*DOMESTIC
|
0.15
|
(0.081)
|
|
CUR*DOMESTIC
|
0.087*
|
(0.013)
|
|
RER*DOMESTIC
|
-3.025**
|
(0.947)
|
|
INF*DOMESTIC
|
-0.039*
|
(0.005)
|
|
SIZE*DOMESTIC
|
0.94
|
(0.958)
|
|
CREDIT/DEPOSIT*DOMESTIC
|
-2.969**
|
(1.358)
|
|
Constant
|
4.791*
|
(2.268)
|
|
Model specification
|
|
R2
|
71%
|
|
Overall F-stat/Wald
|
6.48***
|
Table 1Selected indicators of commercial banks in Turkiye DISPLAY Table
Table 2Variable definitions DISPLAY Table
Table 3Descriptive statistics DISPLAY Table
Table 4Correlation matrix of error terms obtained from models related to banks DISPLAY Table
Table 5Pesaran and Yamagata (2008) test results DISPLAY Table
Table 6Overall statistical significance of equations DISPLAY Table
Table 7Panel SUR estimations for Turkish banks DISPLAY Table
Table 8Panel SUR-MG results DISPLAY Table
Table 9Results of panel model estimation DISPLAY Table
* The authors would like to thank two anonymous reviewers for their valuable help in completing this article.
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September, 2024
III/2024
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