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Interest Rate and Financial Performance of Banks in Pakistan

Author

Listed:
  • Afzal Ahmed

    (Shaheed Zulfikar Ali Bhutto Institute of Science & Technology (SZABIST), Karachi, Pakistan)

  • Raja Rehan

    (University of Kuala Lumpur, Kuala Lumpur, Malaysia.)

  • Imran Umer Chhapra

    (Shaheed Zulfikar Ali Bhutto Institute of Science & Technology (SZABIST), Karachi, Pakistan)

  • Saima Supro

    (Shaheed Zulfikar Ali Bhutto Institute of Science & Technology (SZABIST), Karachi, Pakistan)

Abstract

The efficiency of banking sector is considered most important for the economic growth, monetary policy implementation and macro-economic stability. The objective of this study is to evaluate the impact of interest rate fluctuations on the profitability of banks. Thus, annual data of seven years from 2007 to 2014 has been taken for 20 banks operating in Pakistan. The sample banks are taken on the basis of highest market share and return. To make substantially noteworthy results study uses Correlation and Regression analysis in order to evaluate the impact of interest rate changes (INT), deposits with other banks (DWOB), advances and loans (ADV) and investment (INV) over the profitability indicators; return on assets (ROA), return on equity (ROE) and earnings per share (EPS). The result shows that deposits with other banks and interest rate are negatively affecting the profitability of banks, while advances and loans and investment are having positive influence over profitability of banks.

Suggested Citation

  • Afzal Ahmed & Raja Rehan & Imran Umer Chhapra & Saima Supro, 2018. "Interest Rate and Financial Performance of Banks in Pakistan," International Journal of Applied Economics, Finance and Accounting, Online Academic Press, vol. 2(1), pages 1-7.
  • Handle: RePEc:oap:ijaefa:2018:p:1-7
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    References listed on IDEAS

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