Productivity, Efficiency and Profitability of Banks

Son yıllarda Türk bankacılık sektörü küresel rakiplerinin çoğuna kıyasla daha iyi performans göstermektedir. Bu çalışmada, Türkiye’de faaliyet gösteren 30 ticari bankanın 2002-2012 yılları arasındaki verileri kullanılarak karlılık analizi yapılmaktadır. Banka karlılık ölçütü olarak aktif karlılığı kullanılmaktadır. Aktif karlılığı üzerinde bankaya özgü veya makroekonomik faktörlerin hangisinin anlamlı etkilerinin olduğunu göstermek için panel veri analizi yöntemi tercih edilmiştir. Çalışmanın bulguları, banka karlılığı üzerinde hem bankaya özgü (aktif kalitesi, sermaye yeterliliği, gelir-gider yapısı ve aktif büyüklüğü), hem de makroekonomik faktörlerin (büyüme oranı ve enflasyon) etkili olduğunu göstermektedir.

In recent years the Turkish banking sector outperformed compared to its global rivals. Therefore in this study, profitability analysis of 30 commercial banks operating in Turkey is performed using data between the years 2002 and 2012. As a measure of bank profitability, we use return on assets. In order to demonstrate the bank specific or macroeconomic factors that have significant impacts on return on assets, we prefer panel data analysis method. The findings of the study indicate that both bank-specific (asset quality, capital adequacy, income-expenditure structure, and asset size) and macroeconomics factors (growth rate and inflation) have an impact on bank profitability.

An end-to-end workflow analysis tightly coupled with a dashboard reporting approach provides management with a capability for quick assessment of a changing environment and the ability to achieve the highest payback levels. In addition, the service facility can be organized around customer segments, as dictated by customer profitability guidelines.  An end-to-end workflow defines, illustrates and graphically demonstrates how retail banking operations quantitatively supports numerous productivity improvement ideologies.

ABSTRACT
Financial Services in the UK have been subjected to extreme criticism over the last couple of years during and after the 2008 recession.  This report is concerned with student current accounts in the UK. The service sector has been identified and strategy groups evaluated using a perceptual map. Four of the market leaders and their student current account packages were evaluated from their core to augmented product offerings. To further the study the macro environment was evaluated using a DRETS analysis. This has highlighted all the effecting factors of the financial services market sector. The selected services provider HSBC is evaluated using a service blueprint of the opening procedure of a student current account, the weak areas are identified and changes suggested.  Further more the quality of the service is evaluated using the SERVQUAL gaps model and again actions recommended. HSBC has a number of service delivery failures from opening times which relates and consumer availability to supporting service failures were found. In conclusion a 1 and 5 year strategy has been drawn up taking into consideration marketing strategy theory and real situation methods suggested, based on two specific marketing objectives.

This study examines the impact of capital structure on profitability in the UK banking industry from 2002 to 2012, focusing on six major banks: Santander, Barclays, HSBC, Lloyds, RBS, and Standard Chartered. Utilizing panel data and applying both Ordinary Least Squares (OLS) and Generalized Least Squares (GLS) methods, the research explores how debt to equity (DE), debt to assets (DA), and capital adequacy ratio (CAR) influence return on equity (ROE) and return on assets (ROA). The findings reveal that higher DE and DA ratios positively affect profitability, indicating the benefits of leveraging debt. Conversely, a higher CAR is associated with lower profitability, highlighting the trade-off between financial stability and returns. Additionally, the study considers the impact of bank size, operating efficiency, inflation, and economic growth on profitability. The results provide valuable insights into the strategic management of capital structure in the banking sector, emphasizing the need to balance leverage and capital adequacy to optimize performance while maintaining stability. This research contributes to the broader understanding of capital structure dynamics and offers practical implications for bank management and regulatory policies.

It could be affirmative to say that the index for measuring any growing economy's advancement is the extent to which its industries both the large and small scale has been growing over time. It's a fact that none of these industries can grow without the required financial assistance from financial institution.

Though SHG banking proved to be immensely beneficial to both the poor women and banks, the progress is slowing down and the inter-regional and inter-state variations are increasing in recent years.
In many states the SHG banking has not really taken off. In states where, the program shown dynamism, SHG – banking is slowing down with very few exceptions. AP is one such exception.
It is true that the quality of majority of SHGs in the country is far from satisfactory. In many states/ regions the quality of SHGs is declining over the years. It is also true that bankers’ apathy is one of the principal reasons for the decline of the quality of SHGs. Apart from bankers’ apathy, there are many other factors contributing for low and declining quality of SHGs and other SHG based institutions like federations.
Each of the case study included in this volume indicate that by tackling any small sub-set of above challenges, quality of SHG institutions could be improved and made them to serve, better, their members.

The study aims to ascertain the effect of risks on the profit efficiency of Ghanaian banks. Ratio analysis is used to measure risk while the mean of ratios is used to test the returns to scale property of the industry. The non-parametric data envelopment analysis profit efficiency scores are estimated using the ratio of cost and revenue approach and using the bootstrapped truncated regression the nexus is ascertained. Data from 2000-2015 of 32 Ghanaian banks was used. The study found significant impacts on profit efficiency, negative and positive for liquidity risk and market risk respectively. Credit risk, insolvency risk, and operational risk have a negative and insignificant impact on profit efficiency and capital risk, positive and insignificant. In the absence of insolvency risk, capital risk has a negative impact and in the absence of regulation, operational risk has a positive impact all of which are insignificant. A pooled industry data exhibited a variance returns to scale property. There is comparatively high-profit efficiency at 68% calculated based on each year’s returns to scale over the study period which shows the closeness of the banks to the benchmark efficiency frontier. Regulation and diversification respectively have a negative and positive impact while intermediation, return on asset and concentration in the absence of size, has a positive and significant impact on profit efficiency. This paper is the first risk-efficiency study of its kind that investigates the nexus between various risk types with profit efficiency. It has also covered all key risk types specified in the Basel Accord (credit, liquidity, market and operational risk) and this will provide relevant knowledge to the government, regulatory supervisory bodies, policy makers, practitioners as well as academics. Theories have also been aligned to the study of risk profit efficiency nexus.

he financial sector is one of the most significant sectors for any country, especially if a country is a developing in nature. In such an environment, banking sector plays the vital role to strengthen the economic conditions. Economic growth and international business is increasing in Bangladesh and commercial banks especially private sectors play the major roles. Thus it becomes important to measure the financial soundness of the private banks in order to judge their respective position. The study was conducted to measure the financial soundness of selected private commercial banks of Bangladesh for the period 2006 to 2014. In this paper, an attempt was made to analyze the financial soundness and trend analysis of selected banks using different statistical tools and financial indicators. The study reveals that different financial indicators showed upward trends during the period 2006 to 2014. The study also made a rank of the selected commercial banks based on financial indicators. It was found that a bank with higher deposits, loans & advances, investments, branches, employees does not always mean that has better profitability performance. The research focused on general financial situation (Deposit, Loans & Advances, investment, income, ROA, ROE) forecasting through trend analysis of the historical data available from 2006 to 2014. The analysis also recommends measures that could be adopted by banks to ensure soundness in their operation.

Pupose- The paper aims at analyzing the impact of priority sector advances of scheduled commercial banks
operating in India on their profitability.
Design/methodology/approach- All the scheduled commercial banks operating in India were considered for the
analysis. Data pertaining to bank profitability were taken from Reserve Bank of India website. Ratios of Priority
sector advances to total advances (PSATA) of all commercial banks during the study period taken as an
independent variables whereas, Return on Assets (ROA), Return on Investment (ROI), Return on Equity (ROE),
Ratio of Operating Profit to Total Assets, (OPTA), and Ratio of Interest Income to Total Assets (INTTA) were
taken as dependent variables. Linear regression models were used to examine the relationship between
independent and dependent variables. The study covers the period ranging from 2005 to 2014.
Findings- The study reveals that there exists a statistically significant relationship between PSATA and ROI,
ROA, OPTA, INTTA. On the other hand ROE was found not to be statistically significant.
Implications- The results thus imply that priority sector advances have bearing on bank profitability.
Keywords : Priority sector advances, profitability, PSATA, ROI, ROE, INTTA, OPTA

The main purpose of the paper was to examine the impact operational efficiency, and productivity has on the profitability of Ghanaian banks. Secondary data obtained from the annual financial reports of nine sampled banks for nine years was used for the study. Multiple regression was used for the analysis through SPSS version 23. The results of the analysis indicated that, the most significant variables that affect the profitability of banks in Ghana are net interest margin, non-interest income margin; operating expenses to income ratio; profit per employee; and business per employee. Equity to assets ratio and personnel expenses to operating expenses ratio on the other hand, had an insignificant relationship with the profitability of Ghanaian banks. The implication of the findings is that management should not rely on interest income as the sole source of revenue but rather put much effort in increasing revenue through non-interest income streams. The results again imply that Ghanaian bank management should place emphasis on having lean employees size, and increase the banks' business by mobilizing more deposits and advancing more quality loans. Management should again ensure a reduction in operational expenditure through minimization of wastages and cost cutting to improve operational efficiency.

The world economy is still suffering from the severe global financial crisis that caused the failure of several banks. This has encouraged economists worldwide to consider alternative financial solutions and attention has been focused on Islamic banking and finance as an alternative model. Hence, this study examines the efficiency level of Islamic banks during the financial crisis specifically in Middle Eastern and Asian countries from 2007 to 2010. Moreover, bank-specific and risk factors were examined to understand the determinants of efficiency. The efficiency of Islamic banks is measured using data envelopment analysis by adopting the intermediation approach. The financial information is extracted from BankScope database for a four year period (2007–2010) which includes 79 Islamic banks across a number of countries. The study also critically analyses pure technical efficiency and scale efficiency of the Islamic banks in Middle Eastern and Asian countries and estimates their return to scale. The findings explain that Islamic banks were able to sustain operations through the crisis. However, the study also shows that the majority of these Islamic banks were scale inefficient. Most of the scale inefficient banks were operating at decreasing returns to scale. This study also found that both profitability and capitalisation were the main determinants of Islamic banking efficiency. Hence, the findings of this study have policy implications and make a contribution to policy-making by providing empirical evidence on the performance of the Islamic banks and their efficiency levels.

In this paper, we tried to see if the Tunisian banks are ready to confront the different and main challenges of financial liberalization. The main objective of this paper is defined in this context. We investigate the cost efficiency of Tunisian universal banks over the period 1997-2006. We examine the influence of environmental variables on the bank cost-efficiency. We used a parametric approach stochastic "SFA". Our results generally indicate the deterioration of different financial indicators of Tunisian banking system, and show that there is a reduction in the level of cost-efficiency after introducing the environmental variables in the model. Our results suggest as well that private banks are more efficient than ownership banks; foreign banks are more efficient than domestic banks. Finally, we found that small and Medium-sized banks are more efficient than large banks. JEL classification numbers: G21, F36, C13

Using a panel data set of 4995 banks across 11 developed and emerging countries during the period (2011-2015), this report analyses the amount of liquidity created by banks, how liquidity creation, bank-specific and the macroeconomic factors affecting bank profitability. The results show evidence of increased creation of liquidity over the period. By applying the panel data fixed effect technique, banks that create more liquidity, are set up to have lower profitability. As well as, Asset management, bank size and capital ratio are positively correlated with bank profitability. While, credit quality and operating efficiency affect bank's profits negatively. Additionally, macroeconomic factors have different impact on profitability indicators in each market. Our findings may help decision makers inside and outside bank to determine important factors affecting bank profitability.

Od czasu reaktywowania w 1990 roku w Polsce samorządu terytorialnego na rynku bankowym pojawiły się gminy-nowe podmioty prowadzące specyficzną działalność, które zgłaszają popyt na rozmaite usługi bankowe. Krąg tych podmiotów powiększył się po refor-mie administracyjnej, która wprowadziła-obok gmin-dwa nowe szczeble samorządu te-rytorialnego (powiaty i samorząd województwa). Jednostki samorządu terytorialnego są z wielu względów atrakcyjnymi klientami dla banku. Po pierwsze, posiadają znaczne środki finansowe o niepodważalnej wiarygodności, poza tym mają duży potencjał rozwoju i znacz-ne potrzeby. Ponadto liczba jednostek samorządu terytorialnego przesądza o tym, że są one dla banków i będą w przyszłości bardzo ważnym partnerem. Współpraca wymienionych jed-nostek z bankami nabiera szczególnego znaczenia w aspekcie wstąpienia Polski do UE i związanym z tym wzrostem aktywności inwestycyjnej sektora samorządowego. Celem artykułu jest przedstawienie zakresu i charakteru współpracy banków spółdziel-czych z jednostkami samorządu terytorialnego w Polsce oraz zidentyfikowanie podstawo-wych barier tej współpracy, wskazywanych przez banki spółdzielcze. W artykule autorka przedstawi wyniki badań ankietowych przeprowadzonych według stanu na dzień 31.12.2007 roku wśród 140 banków spółdzielczych-zrzeszonych w jednym z polskich banków zrzeszających-obsługujących łącznie prawie 600 jednostek samorządo-wych.

Banks in India have focused on non-interest income streams to complement their income from traditional interest earning activities for some years now. This move to innovation adoption and new income streams has been more pronounced for new private and foreign banks, while there appears to have been certain hesitation on the part of public
sector and old private banks. This article studies the impact of the move to new income streams and the consequent rising diversification on performance (as measured by profitability and stability of income) for Indian banks.
A comparative analysis of income generated from these income streams for different bank groups in India shows that new private banks and foreign banks in India have been more successful than public sector banks in generating a greater proportion of their income from non-interest and fee-based sources. However, this increasing diversification
cannot be linked to better risk-adjusted performance in the Indian context.
The article finds that the rising share of fee-based income and non-interest income in total income and diversification has a positive impact on profitability, but the impact on risk-adjusted performance and hence stability is not statistically significant. While the results show a positive impact of diversification on profitability, the article underlines
that the impact direction of diversification measures may be negative, which is in agreement to what many studies have shown in the US, European, Australian and Indian contexts.
This article considers the impact of diversification in non-interest income separately from diversification in total income. This diversification score helps to know if the banks are generating their non-interest income from only fee income or only their own investments
or have they diversified the non-interest income generation by focusing on both. Importantly, there is a positive impact of increasing share of ‘fee income’ in both total income and non-interest income on profitability as well as risk-adjusted measures. The results underscore that while public sector banks need to generate more income from fee-based activities, it would be imperative to choose sources of fee-based income that
remain stable and have a positive impact on risk-adjusted measures.
Using multiple regression analysis, the impact of diversification and increasing share of fee-based income on profitability and risk-adjusted profitability is questioned for all banks in India over the period 2005–2012.
The article finds that the rising share of fee-based income and non-interest income in total income and diversification has a positive impact on profitability, but the impact on risk-adjusted performance and hence stability is not statistically significant. While the results show a positive impact of diversification on profitability, the article underlines that the impact direction of diversification measures may be negative, which is
in agreement to what many studies have shown in the US, European, Australian and Indian contexts.This article considers the impact of diversification in non-interest income separately from diversification in total income. This diversification score helps to know if the banks
are generating their non-interest income from only fee income or only their own investments or have they diversified the non-interest income generation by focusing on both. Importantly, there is a positive impact of increasing share of ‘fee income’ in both total income and non-interest income on profitability as well as risk-adjusted measures. The
results underscore that while public sector banks need to generate more income from fee-based activities, it would be imperative to choose sources of fee-based income that remain stable and have a positive impact on risk-adjusted measures.

The aim of this study is to examine the relationship between banking sector reform and bank performance – measured in terms of efficiency, total factor productivity growth and net interest margin – accounting for the effects through competition and bank risk-taking. To this end, we develop an empirical model of bank performance and draw on recent econometric advances to consistently estimate it. The model is applied to bank panel data from ten newly acceded EU countries. The results indicate that both banking sector reform and competition exert a positive impact on bank efficiency, while the effect of reform on total factor productivity growth is significant only toward the end of the reform process. Finally, the effect of capital and credit risk on bank performance is in most cases negative, while it seems that higher liquid assets reduce the efficiency and productivity of banks.

Dienstleistungsunternehmen stehen bzgl. der Wirtschaftlichkeit ihrer Kundenbeziehungen unter grossem Handlungszwang. Dies betrifft insbesondere das Geschäft mit privaten Endverbrauchern. Gemäss einer Umfrage wurde die fehlende Wirtschaftlichkeit bei der Bearbeitung von Kleinkunden als ein vordringliches Problem genannt (Belz 1998a, S. 21). Ursachen dafür sind Kostenexplosionen und Ertragseinbrüche, daraus resultierende sinkende Margen sowie Investitionen in renditebewusste Kunden (Balzer 1996, S. 50). Wer seine Kunden künftig weiterhin so teuer und wenig zielgerichtet bearbeitet, "(...) spürt die Peitsche des Marktes" (Balzer 1996, S. 50). Zentral wird eine Ökonomisierung solcher Kundenbeziehungen (Rapp 2000, S. 22), sodass sowohl dem Kunden als auch dem Unternehmen ein angemessener Nutzen entsteht (Tomczak et al. 2001, S. 8; Expertengespräch Dresdner Bank).

Die meisten Unternehmen, die Kundenwert- oder Kundenprofitabilitätsanalysen durchführen, stellen zu ihrer Überraschung fest, dass der Anteil ihrer wenig profitablen oder unprofitablen Kunden enorm hoch ist. Der Profit von wirtschaftlich starken Kunden wird häufig dazu verwendet, nicht profitable Kunden zu subventionieren (Adrion 1997, S. 49; Belz 1986, S. 339 f.; Belz et al. 1998, S. 50; Expertengespräch DEVK).

Oftmals wird die so genannte Pareto-Regel ("20/80-Regel") zitiert, der zufolge mit nur 20 Prozent der Kunden 80 Prozent der Umsätze generiert werden (Homburg/Beutin 2001, S. 214; Expertengespräche Credit Suisse (b); Deutsche Bank). Bestimmte Autoren (z.B. Kotler 1999, S. 138) konstatieren sogar, dass die Regel zu modifizieren sei in eine 20/80/30-Regel. Diese besagt, dass die unprofitabelsten 30 Prozent des Kundenstammes eines Unternehmens die (potenziellen) Gewinne halbieren. Zentral für eine Profitabilitätsbetrachtung ist demnach nicht die Umsatz-, sondern die Gewinnverteilung. Um als Unternehmen einen genauen Überblick über den Anteil an nicht profitablen Kunden zu erhalten, ist eine Analyse der Kundenprofitabilität notwendig.

Die in der Abbildung 1 dargestellte so genannte Stobachoff-Kurve (vgl. Storbacka 1994a; 2000, S. 569 ff.) stellt die Profitabilitätsanalyse von Privatkunden einer fin-nischen Kleinbank dar. Die Zahl der untersuchten Kunden der Bank beträgt 1'238 (Expertengespräch CRM Group). Die Kurve wird auf Basis der individuellen Profitabilität der einzelnen Kunden kalkuliert und erstellt. Im Anschluss an die Berechnung der Profitabilität werden die Kunden in Reihenfolge der Höhe der Profitabilität aufgelistet, sodass im Beispiel Bankkunde Nr. 1 den profitabelsten und Konsument Nr. 1'238 den unprofitabelsten Nachfrager darstellen. Die Kundengewinne werden anschliessend auf¬addiert. Die entstandene Kurve zeigt den akkumulierten Profit über die untersuchten Kunden (Rapp/Decker 2000, S. 5 f.).

Auf Basis der Kurve ist es möglich, Schlussfolgerungen über den Zustand der Kundenbasis der Privatkunden der Bank zu ziehen (Rapp 2000, S. 88; Rapp/Decker 2000, S. 6; Expertengespräch CRM Group). Es zeigt sich ein alarmierendes Bild:

• In dem stark ansteigenden Bereich der Kurve werden profitable Kunden hinzuaddiert. Nur etwa 250 von insgesamt 1'238 Kunden sind profitabel, d.h. ca. 20 Prozent, wobei einige Kunden hochprofitabel sind, andere gerade in der Profitabilitätszone liegen. Diese Kunden erwirtschaften 9,5 Millionen Euro Gewinn.
• Die restlichen 1'000 Kunden sind unprofitabel. Die auf die 250 profitablen Kunden folgenden 900 Nachfrager (über 70 Prozent) liefern keine Erträge, erkennbar anhand des Sinkens der Kurve zwischen Kunde 250 und 1'100. In Summe verursachen diese Kunden einen erheblichen Verlust von ca. 3,5 Millionen Euro. Die restlichen 100 Kun¬den (knapp zehn Prozent) ab Nachfrager 1'100 bewirken einen noch stärkeren Abwärtstrend der Kurve, denn sie generieren ebenfalls einen hohen Verlust. Dieser beträgt sieben Millionen Euro.

Insgesamt ist dadurch auf Grund der grossen Anzahl nicht profitabler Kunden die Gesamtverteilung negativ. Das Unternehmen erzielt einen Verlust von einer Million Euro mit diesen Kunden. Über alle Kunden betrachtet basiert die Existenz des Unternehmens lediglich auf wenigen profitablen Kunden. Bei einer solchen Verteilung ist es finanziell gefährdet und extrem anfällig im Wettbewerb. Das Dienstleistungsunternehmen muss insbesondere bei der grossen Anzahl von nicht profitablen Kunden ansetzen. Bei diesen Kunden handelt es sich zumeist um kleinvolumige Kunden. Die Rentabilitätsproblematik dieser Kunden stellt damit die zu bewältigende Management¬herausforderung dar.

This article presents an empirical banking application illustrating the use of a nonpara-metric frontier model relying on a probabilistic definition of the production frontier. It investigates the statistical significance of nonperforming loans in productive efficiency for a sample of Brazilian banks using the concepts of conditional and unconditional efficiency measures in a context where it is not necessary to impose any particular distribution on the production data. The analysis is robust relative to the assumptions of convexity and separability of the underlying technology. It is concluded that, on average, a relative increase of 1% in nonperforming loans implies a statistically significant relative reduction of 5.7% in the conditional measure of efficiency.

Nell' ultimo biennio il processo di cambiamento e di concentrazione del sistema bancario italiano, in precedenza più lento che negli altri paesi europei, mostra chiari segnali di accelerazione. Un processo destinato a rafforzarsi nei prossimi anni, favorendo la crescita dimensionale dei gruppi bancari sia all' interno che nei rapporti con banche estere e assicurazioni. Ne scaturirà un sistema fondato su tre pilastri: pochi global players con assetti interni molto coesi e unitari, un numero poco più elevato di gruppi integrati secondo logiche federative a prevalente proiezione nazionale, oltre alle banche locali orientate a strategie produttive o distributive di nicchia.

This paper seeks to examine empirically whether foreign banks on an average operate with greater efficiency and so attain higher levels of productivity and profitability. For this purpose, first, a stochastic frontier production function for the banking industry is estimated and bank-wise technical efficiency is computed. In the second stage, the authors compare the mean efficiency level of foreign banks with that of domestic banks. In addition, foreign and domestic banks are also compared with respect to the other measures of performance, namely, productivity and profitability.

In this paper, we use a semi-parametric two-stage model to examine the effect of bank-specific, industry-specific and macroeconomic determinants of bank efficiency. This method, proposed by Simar and Wilson (2007), relaxes several deficiencies of previous two-stage analyses, which regress non-parametric estimates of bank efficiency on exogenous determinants. In particular, we propose a bootstrap procedure to be used in the second stage and we compare the results obtained to the equivalents of a Tobit model. We suggest that the Tobit regressions inaccurately provide insignificant estimates for the effect of bank size, industry concentration and economic investment on bank efficiency, a fact that illustrates the power of the new method. Since the effect of these determinants has been ambiguous in previous literature, this may be a desideratum for future research.

This article examines cost economies, productivity growth and cost efficiency of the Chinese banks using a unique panel dataset that identifies banks’ four outputs and four input prices over the period of 1995–2001. By assessing the appropriateness of model specification, and making use of alternative methodologies in evaluating the performance of banks, we find that the joint-stock commercial banks outperform state-owned commercial banks in productivity growth and cost efficiency. Under the variable cost assumption, Chinese banks display economies of scale, with state-owned commercial banks enjoying cost advantages over the joint-stock commercial banks. Consequently, our results highlight the ownership advantage of these two types of banks and generally support the ongoing banking reform and transformation that is currently taking place in China.