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Factors Affecting Bank Profitability in Pakistan


  • Sehrish Gul

    () (COMSATS Institute of Information Technology, Abbottabad, Pakistan)

  • Faiza Irshad

    () (COMSATS Institute of Information Technology, Abbottabad, Pakistan)

  • Khalid Zaman

    () (COMSATS Institute of Information Technology, Abbottabad, Pakistan)


The purpose of this research is to examine the relationship between bank-specific and macro-economic characteristics over bank profitability by using data of top fifteen Pakistani commercial banks over the period 2005-2009. This paper uses the pooled Ordinary Least Square (POLS) method to investigate the impact of assets, loans, equity, deposits, economic growth, inflation and market capitalization on major profitability indicators i.e., return on asset (ROA), return on equity (ROE), return on capital employed (ROCE) and net interest margin (NIM) separately. The empirical results have found strong evidence that both internal and external factors have a strong influence on the profitability. The results of the study are of value to both academics and policy makers.

Suggested Citation

  • Sehrish Gul & Faiza Irshad & Khalid Zaman, 2011. "Factors Affecting Bank Profitability in Pakistan," Romanian Economic Journal, Department of International Business and Economics from the Academy of Economic Studies Bucharest, vol. 14(39), pages 61-87, March.
  • Handle: RePEc:rej:journl:v:14:y:2011:i:39:p:61-87

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    References listed on IDEAS

    1. Demirguc, Asli & Huizinga, Harry, 1999. "Determinants of Commercial Bank Interest Margins and Profitability: Some International Evidence," World Bank Economic Review, World Bank Group, vol. 13(2), pages 379-408, May.
    2. Athanasoglou, Panayiotis P. & Brissimis, Sophocles N. & Delis, Matthaios D., 2008. "Bank-specific, industry-specific and macroeconomic determinants of bank profitability," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 18(2), pages 121-136, April.
    3. Molyneux, Philip & Thornton, John, 1992. "Determinants of European bank profitability: A note," Journal of Banking & Finance, Elsevier, vol. 16(6), pages 1173-1178, December.
    4. Demirguc-Kunt, Asli & Huizinga, Harry, 2000. "Financial structure and bank profitability," Policy Research Working Paper Series 2430, The World Bank.
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    Cited by:

    1. Mohamed Aymen Ben Moussa, 2015. "The Determinants of Bank Liquidity: Case of Tunisia," International Journal of Economics and Financial Issues, Econjournals, vol. 5(1), pages 249-259.
    2. repec:bec:imsber:v:6:y:2014:i:2:p:27-46 is not listed on IDEAS
    3. Sapto Jumono & Noer Azam Achsani & Dedi Budiman Hakim & Muhammad Fidaus, 2016. "The Effect of Loan Market Concentration on Banking Rentability: A Study of Indonesian Commercial Banking, Dynamics Panel Data Regression Approach," International Journal of Economics and Financial Issues, Econjournals, vol. 6(1), pages 207-213.
    4. Brooke Alexandra Maeda, 2015. "Flight to Liquidity on the Tokyo Stock Exchange during the 2008 Share Market Crashes," International Journal of Economics and Financial Issues, Econjournals, vol. 5(3), pages 790-801.
    5. Abugamea, Gaber, 2018. "Determinants of Banking Sector Profitability: Empirical Evidence from Palestine," MPRA Paper 89772, University Library of Munich, Germany, revised 2018.
    6. Majid Karimzadeh & S. Jawed Akhtar & Behzad Karimzadeh, 2013. "Determinants of Profitability of Banking Sector in India," Transition Studies Review, Springer;Central Eastern European University Network (CEEUN), vol. 20(2), pages 211-219, October.
    7. Vincent Okoth Ongore & Gemechu Berhanu Kusa, 2013. "Determinants of Financial Performance of Commercial Banks in Kenya," International Journal of Economics and Financial Issues, Econjournals, vol. 3(1), pages 237-252.
    8. Lavinia Mihaela GUŢU, 2015. "Microeconomic Factors Affecting Banks’ Financial Performance: The Case Of Romania," SEA - Practical Application of Science, Fundația Română pentru Inteligența Afacerii, Editorial Department, issue 7, pages 39-44, April.
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    10. repec:asi:aeafrj:2017:p:1317-1325 is not listed on IDEAS
    11. Siudek, Tomasz & Drabarczyk, Katarzyna, 2015. "Wzrost i rozwój gospodarczy a efektywność finansowa banków komercyjnych w krajach Unii Europejskiej," Problems of World Agriculture / Problemy Rolnictwa Światowego, WydziaÅ‚ Nauk Ekonomicznych, Uniwersytet Warszawski, vol. 15(30), pages 1-12, June.
    12. repec:mth:ifb888:v:3:y:2016:i:2:p:89-99 is not listed on IDEAS
    13. Shah, Mumtaz Hussain & Khan, Sajjad, 2017. "Factors Effecting Commercial Banks Profitability in Pakistan," MPRA Paper 82016, University Library of Munich, Germany.
    14. repec:oap:ijaefa:2018:p:1-7 is not listed on IDEAS
    15. repec:gam:joitmc:v:4:y:2018:i:4:p:43-:d:171350 is not listed on IDEAS
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    17. Songül KAKÝLLÝ ACARAVCI & Ahmet Ertugrul ÇALIM, 2013. "Turkish Banking Sector’s Profitability Factors," International Journal of Economics and Financial Issues, Econjournals, vol. 3(1), pages 27-41.
    18. Asikhia Olalekan & Sokefun Adeyinka, 2013. "Capital Adequacy And Banks’ Profitability Of Deposit Taking: An Empirical From Nigeria," Far East Journal of Psychology and Business, Far East Research Centre, vol. 13(4), pages 32-41, October.
    19. repec:dat:earchi:y:2018:i:4:p:60-78 is not listed on IDEAS

    More about this item


    Financial Institutions; Banks; Profitability; Return on Assets; Correlation; Pooled OLS; Pakistan.;

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages


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