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The Assessment of Banking Performances- Indicators of Performance in Bank Area
Abstract
Profitability is a management concept with the objective of assessment bank's results from efficiency point of view both for entirely activity and for differently management compounds.From conceptual point of view, profitability represents the modality to achieve the major goal of bank's activity, respectively the maximization of profit in minimization risk conditions. The approach from a quality perspective of activity results conducts to assessment of application modalities of different compunds of management, in comparison to the strategy elements, thus must to result the concrete degree to achieve the politic and banking strategy compunds.
... Moreover, it can also measure the efficiency of the management in utilizing those assets for income generation (Khrawish, 2011). ROA is one of the most essential financial ratios to measure bank's profitability (Alexandru et al., 2008;Murthy and Sree, 2003). The higher the ROA, the more efficient the company is in using its resources (Wen Therefore, this study will use Return on Assets to measure profitability as well as shareholders wealth. ...
... ROE is another profitability ratio that has received importance in measuring bank's performance. It can be used to measure the financial performance of a firm before and after merger and acquisitions (Murthy and Sree, 2003;Alexandru et al., 2008). ROE is a ratio of Net Income after Taxes divided by Total Equity Capital (Kabajeh et al, 2012, p.117). ...
This study investigates the impact of mergers and acquisitions on financial performance of banks using US banking industry data on horizontal mergers and acquisition deals completed during 2013-2015. The study encompassed a 4 years pre and 4 years post integration period of sampled banks which were confined to banks listed on US stock exchange primary list. Financial performance was measured in terms of profitability and shareholders wealth using accounting ratios namely, Return on Assets (ROA), Return on Equity (ROE) and Net Profit Margin (NPM). This study empirically analysed the impact of mergers and acquisitions on financial performance of US banking industry by mainly employing Paired Sample T-Test and Regression Analysis. The results on paired sample T-Test demonstrated that there is statistically significant positive difference in the mean values of pre and post integration period for ROE, ROA and NPM. Regression analysis support these findings by demonstrating that that there is statistically significant positive impact of Mergers and Acquisition on Return on Equity (ROE). In contrast, a statistically significant but negative impact was found for Return on Assets (ROA). However, taking view of the economic significance, the overall results suggest that mergers and acquisitions have significant positive impact on financial performance (i.e. profitability and shareholder’s wealth) of banking industry.
... Financial intermediation is a process which involves surplus units depositing funds with financial institutions who then lend to deficit units (Olowe, 2016, 50-63). According to this theory, financial intermediaries come into existence because of a lack of complete information, high transactional costs and regulation methods (Caruntu and Romanescu, 2008). Financial intermediation theory views intermediaries as a way of reducing informational asymmetries and transaction costs through pooling the resources of customers, resulting in economies of scale (Caruntu and Romanescu, 2008). ...
... According to this theory, financial intermediaries come into existence because of a lack of complete information, high transactional costs and regulation methods (Caruntu and Romanescu, 2008). Financial intermediation theory views intermediaries as a way of reducing informational asymmetries and transaction costs through pooling the resources of customers, resulting in economies of scale (Caruntu and Romanescu, 2008). The most important contribution of intermediaries is a steady flow of funds from surplus to deficit units. ...
This work examined the evolvement of financial technology (fintech) in Nigeria's commercial capital city, Lagos, and its influence on the delivery of financial services in Nigeria. The purposive sampling technique was adopted to select members of the population of financial services consumers in Lagos, the commercial and economic capital of Nigeria. A sample size of 400 was drawn with a total of 303 copies of the questionnaire properly completed, returned, and found sufficient to be employed for data analysis. ANOVA regression analysis was employed to analyse the data. The findings of the study indicated that factors such as the increase in technological advancement and its usage by younger consumers are the major drivers of financial services. Furthermore, it was established that many customers preferred fintech companies to traditional financial institutions in the scope of the delivery of financial services. It was also established that fintech companies have a significant influence on customer satisfaction and are changing the dynamics of competition in the delivery of financial services in Nigeria.
... As with prior studies (e.g., Teker et al., 2011;Delen et al., 2013;Ghebregiorgis and Atewebrhan, 2016;Wozniewska, 2008;Caruntu and Romanescu, 2008;Masud and Haq, 2016, amongst others), the study employs traditional financial ratios to evaluate the financial performance between pre-and post-reorganisation of the top management of IBBL. Particularly, the study compares a range of financial ratios and data, which are publicly available and collected from the published several years' annual reports of IBBL, between 2016, the year just before management reorganisation, and 2017, the year of the management reorganisation. ...
... Measuring banks' efficiency is, however, difficult because there is no satisfactory definition of bank output (Vittas, 1991). Following prior studies (e.g., Wozniewska, 2008;Caruntu and Romanescu, 2008;Masud and Haq, 2016;Ghebregiorgis and Atewebrhan, 2016, amongst others) the study uses six financial ratios to measure the efficiency of IBBL. They are (a) deposit turnover to employee (DTE), calculated as a ratio of total deposit to number of employees; (b) investment turnover to employee (ITE), calculated by dividing total investment by number of employees; (c) revenue turnover to number of employees (RTE), calculated as a ratio of total income to number of employees; (d) employment efficiency rate (EER), calculated by dividing total assets by number of employees; (e) return on capital employed (ROCE), calculated by dividing operating profit by capital employed (total assetscurrent liabilities); (f) operational efficiency rate (OER), calculated by dividing total income to total expenses. ...
This paper aims to assess the impact of recent management reorganisation on the financial performance of Islami Bank Bangladesh Ltd. (IBBL). The study compares a range of financial ratios and data, which are publicly available and collected from the published several years' annual reports of IBBL, between 2016, the year just before management reorganisation, and 2017, the year of the management reorganisation. However, additional ratios and data for the period 2012-2015 are also used for the sake of observing the financial trend. Unlike prior studies, the study evaluates financial performance of IBBL from three viewpoints, such as accounting return-based, market-based and value-based viewpoints and then assesses the impact of management reorganisation on them. Moreover, a supplementary test is carried out employing the Altman Z-Score model to predict whether the bank stays away from the business failure and insolvency risk. The study found that the bank had experienced a financial downfall during the period 2013-2015. However, the performance began to improve from 2016, the year just before the management reorganisation and the trend of improvement continued in 2017, the year of management reorganisation. The study, therefore, concludes that the recent management reorganisation of IBBL does not have an impact on the financial performance. The results of the study have major policy implications because the evidence on this issue would provide economic motives to favour or not to favour the reorganisation of IBBL in the future.
... Return on asset (ROA): ROA is a performance indicator that measures the effect of management capacity to use the financial and real resources of bank to generate profit (Carunto and Romanescu, 2008). It is also known as profit to assets or return to investment (ROI). ...
... ROE is a significant indicator for performance. It measures the banking management in all its dimensions and offers the utilization of shareholders capitals, the effect of their retainers on bank activity (Carunto and Romanescu, 2008). ROE is the ratio of the net profit after tax to total equity for the fiscal year. ...
This study contrasts empirical studies which had focused on listed bank at the detriment of unlisted banks. In other to enhance public confidence in the banking sector and ensure financial inclusion, this study examined the relationship between leverage and performance of unlisted banks in Ghana. This study examined the relationship between leverage, other moderating variables and bank performance by collecting data from fifteen unlisted universal banks in Ghana from 2006 to 2016. The cross sectional time series research design with the quantitative research approach was adopted for the study. The fixed effect panel regression was used to analysis the variables from the data collected. The outcome of the study showed that unlisted banks in Ghana are highly leveraged with more debt to equity. The results also indicated that the level of gearing for unlisted banks has a positive relationship with the bank performance variables which are return on asset, return on equity and rate of profit. This is attributed to the cost of debt and type of debts that are contracted by the unlisted banks coupled with the efficiency in transforming such debts into less risky asset. The correlation and regression result showed a significant positive relation between firm size and bank performance. The study recommends that stakeholders of the banking industry must be concerned with the utilization of debts effectively and efficiently to enhance an optimal leverage ratio that could stand the risk of highly geared bank in a more integrated financial system. To achieve this, the regulators of the banking industry in Ghana must develop policies that seek to inject more equity funds in the operation of banks; guides in asset management and effective cost control in relation to leverage. This will boast the efficiency of the banking industry in their intermediation role.
... The profitability analysis is achieved on a set of indicators in order to measure the banking performance. The indicators result and arise from the accounting dates, which illustrates the reference periods in the most synthetic expressions of balance sheet and the profit and loss account (Caruntu and Romanescu, 2008). ...
... Return on Equity or profit to equity, is the most significant indicator for profit, which measures the banking management in all its dimensions, and offers an image over the way to use the capitals brought by shareholders, the effect of their retainer in bank's activity (Caruntu and Romanescu, 2008). Return on equity measures a corporation's profitability by revealing how much profit a company generates with the money shareholders have invested. ...
... To this end, both global and local programs as well as institutions have focused efforts upon the youths. For example, the United Nations has set aside every twelfth day of August of every year as an International Youth Day, United Nations Development Program (Romanescu, 2018). This was all intended to mobilize local and international attention towards the youth and the problems they face particularly unemployment. ...
This study aimed to assess the contribution of credit schemes on youth entrepreneurship in Rwanda, specifically in Nyarugenge district. The research involved 540 respondents, including 72 youth entrepreneurs, eight local leaders, and two Vision Fund staff. Both qualitative and quantitative data were used, with the quantitative data containing statistical expressions to interpret achievements. The results showed that fixed pay and salary increases employees' performance, while minority disagreed. The null hypothesis was rejected, and the alternative hypothesis was accepted, indicating that the independent variable influences youth entrepreneurs' performance at Vision Fund, Rwanda. The regression equation demonstrated that youth entrepreneurs' performance at Vision Fund, Rwanda will always depend on a constant factor of.453, regardless of other factors. The majority of respondents agreed that microfinance has an average number of days a borrower needs to pay bills and obligations in specified periods, while minority disagreed. The ANOVA showed a p-value less than 0.05, indicating that there is no statistical significant relationship between credit limits and collection period and youth entrepreneurs' performance. Therefore, credit limits and collection period in Vision Fund are not implemented by top management, which does not have a statistical influence on youth entrepreneurs' performance. The researcher suggested several recommendations for management, such as understanding the default probability of default of entrepreneurs to gauge their future default risk, having a standard credit limit for existing terms and conditions in microfinance, and collecting customer information to improve customer satisfaction and retention. Overall, this study highlights the importance of credit schemes in fostering youth entrepreneurship and promoting economic growth in Rwanda.
... Bank profitability is one of the measures of bank performance and it measures the return bank generates from operations. From a conceptual point of view, profitability represents the modality to achieve the major goal of a bank's activity, respectively the maximization of profit in minimization risk conditions (Caruntu & Romanescu, 2008) Bank profitability can be measured by Net Interest Margin (The difference between interest income and interest expenses), Return on Equity (Measure of net income per unit of shareholders equity), and Return on Assets which measures profit per unit of Assets (Mutenga, 2016) Following the need for preserving and ensuring sound banking operations in terms of profitability and ensuring sustainable competitive advantage, managements of commercial banks seek efficiency and effectiveness ways to ensure banks continued profitable. Efficiency and effectiveness have been spearheaded by technological changes in the commercial bank industry including, digitalization of operations, development of applications, systems development, and fraud detection systems Empirical studies that focus on diversification have used numerous measures of bank performance, with the majority based on Tobin's q, which is the book value of asset to the replacement cost of the assets. ...
Purpose: The study was conducted to examine the Impact of asset diversification on the profitability of selected large commercial banks in Tanzania. Specifically the study intended to examine the customer loans impact on the profitability of commercial banks in Tanzania, examine the bank assurance impact on the profitability of commercial banks in Tanzania and examine investment in Government securities' impact on the profitability of commercial banks in Tanzania. Methodology: This study uses secondary data sources, mainly from annual reports of listed banks, financial reports in newspapers, and data from the Bank of Tanzania regarding the performance of the banking industry. The variables that were used include bank loan, bank assurance, inflation GDP and government. Data was analyzed using descriptive research design whereby Statistical Package for Social Science (SPSS) was used. Findings: The study revealed that customers loan (p=.0418), investments in government securities (p= .0399), and Bank assurance (p=.0348) were significant in predicting the financial performance of commercial banks since all the p values were less than 0.05. Control variables were able to explain the results, Core capital to RWA (p=.0318), asset size (p=.0255), Liquid assets to total assets (p=.0203), Inflation rate (p=.0219), and GDP growth (p=.0273) significant as they were below 0.05. The study conclude that Asset diversifications have a significant relationship with the performance of commercial banks. Unique Contribution to Theory, Practice and Policy: The study used portfolio Diversification theory. The study period, spanning from 2015 to 2020, witnessed a notable positive impact of bank assurance, customer loans and investment in Government securities on the performance of commercial banks. The demand for this asset type highly during this period, creating an active market that contributed to enhanced returns. The study recommended the need for collaboration by all stakeholders in the financial sector to review the regulations and establish a framework that supports the implementation of new asset development.
... The concept of capital structure has been one of the most puzzling issues in corporate finance literature which has attracted much attention from the financial scholars for many years. According to Alexandru, Genu and Romanescu (2008) capital structure is the manner in which a firm funds its investments by the use of a mixture of debt and equity. Capital structure choice has been and will continue to be a very vital management decision of firms. ...
... Kaplan and Norton (1992) argue that, performance can also be assessed on a balanced scorecard of critical success factors through four perspectives financial, customers, internal business processes and learning and growth. Financial performance of pharmaceutical industry can be measured through variety of ratios of which Return on Asset, Return on Equity and New Interest Margin are the major ones (Murthy & Sree, 2003;Alexandru et al., 2008). ...
This study investigated the effect of debt capital on financial performance of listed pharmaceutical companies in Nigeria. The ex post facto research design was adopted for the study with a population of ten (10) listed pharmaceutical companies in Nigeria as listed by the Nigerian Exchange Group in 2021. Data were retrieved from the annual reports of the selected listed pharmaceutical companies for the period 2013 to 2017. Multiple regression analysis was used to analyze the data gathered with the aid of Stata12 statistical software. The study revealed a negative and insignificant relationship between debt capital and profit before tax of listed pharmaceutical companies in Nigeria. it also revealed a positive and insignificant relationship between debt capital and return on assets of listed pharmaceutical companies in Nigeria. Therefore, it was recommended that management of listed Pharmaceutical companies should not adopt aggressive total debt financing policy. This means that the managers of listed Pharmaceutical companies should concentrate on using more current liabilities to finance assets, relative to debt capital. Also, the government should regulate the financial sector through various monetary and fiscal policies in order to reduce the cost of borrowing given that many Pharmaceutical companies rely on external borrowing to finance their cash requirements. As it has shown in this study that debt capital has no significant relationship with firm’s performance.
... The sample consist of 12 Islamic banks that operate in Malaysia for the period 2004-2018 including conventional banks with Islamic window such as Citibank. A financial ratio is one of the widely used techniques in measuring bank performances and among the ratios used in measuring bank performance are Return on Asset (ROA), Return on Equity (ROE) and Net Interest Margin (NIM) (Alexandru & Romanescu, 2008 (2010) and Flamini, McDonald & Schumacher (2009) used ROA which signifies the efficiency of the bank management to create income from their assets to measure profitability. Other studies used net interest margin (NIM) to measure profitability such as the study by Ameur & Mhiri (2013) which utilized NIM as a profitability proxy because it reflects the profit generated from investment and lending or financing activities. ...
Ijarah (lease contract) is one of the essential financing contracts offered by Islamic banking institutions to meet the demand of the clients. This study investigates the impact of Ijarah financing on Islamic bank performance in Malaysia for the period from 2004-2018 using Fixed and Random Effect Models. Ijarah financing (IJFA) which becomes the focus variable of this study with other six independent variables; operating efficiency (EXTA), bank size (LTA), total financing (TFTA), base rate (BR), consumer price index (CPI) and gross domestic product (GDP) were regressed against return on asset (ROA) and net profit margin (NPM). The results show that Ijarah financing has a positive and significant impact on NPM. The findings suggest that Islamic banks should increase their portfolio of Ijarah financing and this is also support the concentration strategy used by banks in improving Islamic bank performances. An increase in demand for Ijarah financing will increase Islamic banks performance and this reflects that Ijarah financing as an asset creation tool that banks prefer particularly for generating income.
... The sample consist of 12 Islamic banks that operate in Malaysia for the period 2004-2018 including conventional banks with Islamic window such as Citibank. A financial ratio is one of the widely used techniques in measuring bank performances and among the ratios used in measuring bank performance are Return on Asset (ROA), Return on Equity (ROE) and Net Interest Margin (NIM) (Alexandru & Romanescu, 2008 (2010) and Flamini, McDonald & Schumacher (2009) used ROA which signifies the efficiency of the bank management to create income from their assets to measure profitability. Other studies used net interest margin (NIM) to measure profitability such as the study by Ameur & Mhiri (2013) which utilized NIM as a profitability proxy because it reflects the profit generated from investment and lending or financing activities. ...
Ijarah (lease contract) is one of the essential financing contracts offered by Islamic banking institutions to meet the demand of the clients. This study investigates the impact of Ijarah financing on Islamic bank performance in Malaysia for the period from 2004-2018 using Fixed and Random Effect Models. Ijarah financing (IJFA) which becomes the focus variable of this study with other six independent variables; operating efficiency (EXTA), bank size (LTA), total financing (TFTA), base rate (BR), consumer price index (CPI) and gross domestic product (GDP) were regressed against return on asset (ROA) and net profit margin (NPM). The results show that Ijarah financing has a positive and significant impact on NPM. The findings suggest that Islamic banks should increase their portfolio of Ijarah financing and this is also support the concentration strategy used by banks in improving Islamic bank performances. An increase in demand for Ijarah financing will increase Islamic banks performance and this reflects that Ijarah financing as an asset creation tool that banks prefer particularly for generating income.
... Varotto and Zhao (2014) said that the size of the bank to the total assets of the logarithm, the total asset growth rate, return on assets as a measure of profitability. Alexandru and Romanescu (2008) describe that the majority of the research on the determinants of bank profitability, and the total assets are used to measure the size of banks. Bank size is often used to consider the potential economic or economic scale of the banking sector. ...
The objective of this research is to critically evaluate the performance indicators which are used in previous studies and propose a comprehensive indicator to check the performance of selected Islamic and Conventional banks of Pakistan over the period of 2011–2016. The comprehensive indicator of performance is comprised of indicator of profitability, customer satisfaction and cost & revenue efficiency. Where the efficiencies measured using Stochastic Frontier Analysis, while overall indicator has been constructed using Principle Factor Analysis. This study provides ranking of selected banks based on the new indicator of performance and insights to what are possible determinants in conventional and Islamic banking system. This study then compared the determinants of performance such as Bank size, Operating efficiency, Management efficiency, Employee efficiency, and Funding cost between conventional and Islamic banks which are comparable in size. To compare the determinants of performance, regression analysis was applied. Feasible Generalized Least Square (FGLS) approach later used to compare the determinants of performance. Findings show that Meezan bank tops in revenue efficiency and Askari bank tops in cost efficiency. In overall performance comparison, Meezan bank tops accordingly. This study identifies Operating efficiency, Management efficiency, Employee efficiency, and Funding cost as important determinants of Pakistani banking sector.
... Par ailleurs, les entreprises ayant un report négatif ont un levier financier élevé. Il existe dans la littérature plusieurs études qui ont mesurée la performance d'une entreprise en fonction du rendement de l'actif, e.g.Alexandru et Romanescu (2008).Il est important de signaler que la DFIN est une variable dichotome telle que : DFIN = 1 si l'entreprise est en performance financière et DFIN = 0 autrement. Le taux de rendement de l'actif ou TRA mesure la DFIN tel que : TRA < 0 indique que l'entreprise se trouve en DFIN et TRA > 0 indique que l'entreprise est saine.1.2. ...
L’objectif de ce travail de recherche consiste à déterminer l’impact du comité d’audit sur la performance financière des PME libanaises. Ceci dit que l’objectif consiste aussi à étudier l’influence du système de gouvernance sur l’indépendance du comité d’audit. Les variables mobilisées sont relatives aux caractéristiques du conseil d’administration et du comité d’audit. A cela s’ajoute, trois déterminants qui sont relatifs à l’indépendance du comité d’audit, la structure du conseil d’administration et l’impact du système dual. A titre indicatif la rentabilité des PME est relatée notamment à partir des rapports annuels. L’échantillon comprend 58 PME libanaises et l’étude s’étale sur une période de 4 ans, à savoir entre 2011 et 2014. Les résultats font apparaître que le comité d’audit peine à avoir une indépendance totale. Cela peut être expliqué par l’apposement d’un système dual et aussi par le nombre limité au sein du comité. Dans ce sens, le comité d’audit dans les PME libanaises est réprimé notamment à travers le déploiement de ses responsabilités et de sa contribution au niveau de la revue des états financiers. Ce qui s’avère préjudiciable à une meilleure croissance de la performance financière pour les PME
... However, the intention of this study is related to SACCOs' profitability. To measure the profitability of a firm there are variety of ratios used of which ROA, ROE and NIM are the major ones [3]. ...
... This study deals only with the main objective of profitability. In measuring profitability there are several usable ratios such as Return on Assets (ROA), Return on Equity (ROE) and Net Interest Margin (Murthy and Sree, 2003;Alexandru et al., 2008). Khawish (2011) said that ROA can observe the ability of banks to generate profits by utilizing assets (equity and debt) owned by the company. ...
Islamic banking fall on stagnation of financial performance in 2011 after successfully overcoming the financial crisis in 1998 and 2008, as though the Islamic banking sector had only run in place and had no clear purpose in developing the Islamic finance business. The purpose of this study is to clarify the variables that predispose financial performance, as well as predict the decrease and increase of financial performance. This study uses an Artificial Neural Network (ANN) model to find out the variables that affect financial performance and predict the decrease and increase of financial performance of sharia and conventional banking for the next five months. This research generates the variables which affect the financial performance of sharia banking and the prediction of financial performance over the next five months. The variables which affect the level of financial performance of sharia banking affected dominantly by inflation, although the results of conventional banking are the same but not too significant. This shows that sharia banking CBGB (Commercial Bank – Group of Business) 2 is very vulnerable with macroeconomic factors compared with conventional banking. ANN predictions produce an average of 80% success in predicting performance over the next five months, this result is consistent with previous research.
... However, the intention of this study is related to SACCOs' profitability. To measure the profitability of a firm there are variety of ratios used of which ROA, ROE and NIM are the major ones [3]. ...
... Financial performance of individual banks can be measured using a variety of ratios of which Return on Asset, Return on Equity and Net Interest Margin are the major ones (Murthy & Sree, 2003;Alexandru et al., 2008). Return on Assets (ROA) is a ratio of Income to total assets (Khrawish, 2011). ...
Understanding the relationship between ownership structure and performance is critical when assessing the effectiveness of corporate governance. The study sought to establish the effect of ownership structure on the financial performance of listed commercial banks in Kenya. The objective of this paper is to discuss the findings on the effect of government ownership on the financial performance of listed commercial banks in Kenya.
... And the most common measurement of financial performance is Return on Asset ( ROA) shows how well a company controls its costs and utilizes its resources, Return on Equity (ROE) also known as Return on Investment (ROI) is the best measure of the return, since it is the product of the operating performance of asset turnover, and debtequity management of the firm and NIM is a measure of the difference between the interest income generated by banks and the amount of interest paid out to their lenders (for example, deposits), relative to the amount of their interest earning assets (Loans and Advances). Studies made on the financial performance of commercial Banks largely used Return on Asset (ROA), Return on Equity(ROE) and Net Interest Margin (NIM) as a common measure (see for example, Murthy & Sree, 2003;Alexandru, 2008;Ezra, 2013). As concluded by extensive prior academic research there are different accounting based measures for banks' profitability analysis. ...
This study examines the determinants of financial performance of a private commercial bank by using the monthly financial statement of Bank ''X''3 from 2011 to 2016. A quantitative research approach was adopted, and the data were estimated using the Ordinary Least Square approach of multiple linear regression model. The study examined only internal factors such as capital adequacy, loan to deposit ratio, income diversification, operating efficiency, export, liquidity, loan performance and deposit mobilization as explanatory variables. Return on Asset, Return on Equity and Net Interest Margin were used as dependant variables to measure the financial performance of the Bank. The finding of the study revealed that income diversification, deposit amount, export level and loan performance have a significant influence on the financial performance of Bank ''X''. Therefore, it is recommended that commercial banks should increase export proceed, capital and loan production, and should diversify the sources of non-interest incomes in order to improve financial performances, and stay competitive enough in the banking industry.
Keywords: Financial performance, Net Interest Margin, Return on Asset, Return on Equity, Private Commercial Bank, Ethiopia
1
... According to the Flaming et al. (2009) return on assets (ROA) is the key ratio used to make the comparison between the performance of conventional banks and Islamic banks. As discussed by the Alexandru et al. (2008) profitability of conventional banks and Islamic banks can be observed with reference to its assets efficiency, equity efficiency and availability of profit to meet the expense by using the return on assets ratio (ROA), return on equity ratio (ROE) and Profit to expense ratio (PER) respectively. According to the Khrawish (2001) return against the every unit of money invested by the investors and shareholders in equity can be accessed by using the return to equity ratio (ROE). ...
Zahid Iqbal et al./ Elixir Fin. Mgmt. 95 (2016) 40940-40945 40940
... However, the intention of this study is related to the first objective, profitability. To measure the profitability of commercial banks there are variety of ratios used of which Return on Asset, Return on Equity and Net Interest Margin are the major ones (Murthy and Sree, 2003;Alexandru et al., 2008). ...
Studies on moderating effect of ownership structure on bank performance are scanty. To fill this glaring gap in this vital area of study, the authors used linear multiple regression model and Generalized Least Square on panel data to estimate the parameters. The findings showed that bank specific factors significantly affect the performance of commercial banks in Kenya, except for liquidity variable. But the overall effect of macroeconomic variables was inconclusive at 5% significance level. The moderating role of ownership identity on the financial performance of commercial banks was insignificant. Thus, it can be concluded that the financial performance of commercial banks in Kenya is driven mainly by board and management decisions, while macroeconomic factors have insignificant contribution.
... However, the intention of this study is related to the first objective, profitability. To measure the profitability of commercial banks there are variety of ratios used of which Return on Asset, Return on Equity and Net Interest Margin are the major ones (Murthy and Sree, 2003;Alexandru et al., 2008). ...
Studies on moderating effect of ownership structure on bank performance are scanty.
To fill this glaring gap in this vital area of study, the authors used linear multiple regression model and
Generalized Least Square on panel data to estimate the parameters. The findings showed that bank
specific factors significantly affect the performance of commercial banks in Kenya, except for
liquidity variable. But the overall effect of macroeconomic variables was inconclusive at 5%
significance level. The moderating role of ownership identity on the financial performance of
commercial banks was insignificant. Thus, it can be concluded that the financial performance of
commercial banks in Kenya is driven mainly by board and management decisions, while
macroeconomic factors have insignificant contribution.
... However, the intention of this study is related to the first objective, profitability. To measure the profitability of commercial banks there are variety of ratios used of which Return on Asset, Return on Equity and Net Interest Margin are the major ones (Murthy and Sree, 2003;Alexandru et al., 2008). ...
Organizational change in the form of structural, technical, functional, and behavioral change most of the time has negative challenges on the employees in terms of adjustment, downsizing, transfer, and rescheduling of duties. It is in the light of this, that this study investigated the nature and processes of organizational change, with a view to clarifying the links between organizational change and performance of employees in the seventeen sampled banks in Akure, Ondo State. Akure town in Ondo State was purposively selected for this study because the town houses the State head offices of all the banks operating in Ondo State. In other to have a representation of each unit in the banks covered in this study, purposive sampling technique was used in selecting respondents in four units/departments namely business development, operations, compliance/audit and security. Questionnaire was administered to elicit information from the selected respondents for this study. Out of the 17 banks selected in Akure, 254 employees were randomly selected as respondents for this study. Secondary data were sourced from banks, journals, internet resources and government documents. Data collected were analyzed using both descriptive and inferential statistics. The results established that the major organizational changes that were witnessed in the selected banks include structural change (78.08%); functional change (79.16%); technological change (85%); and behavioral change (82.6%). The results revealed that lack of a company-wide definition of change (54.4%); lack of a strategic plan for change (72%); view of quality as a quick fix (71.2%); were key major factors that ignited organizational change in the selected banks in the study area. In addition, the study discovered evidence of significant positive relationship between employees’ performance and structural change (r=1,017; ρ=˃0.05), behavioral change (r=10.026; p˂0.05), functional change (r=3.395; p˂0.05), while technical change (r=–5.342; p˂0.05) had negative relationship with innovative performance of employees in the selected banks in Akure, Ondo State. The study concludes that it is important for banks in developing countries particularly Nigeria, to formulate effective organizational change strategies and create more awareness among employees about organizational change to allay the fear of the aftermath effects as these will enhance the outputs of their workforce. The study recommended that the Nigerian banking structure and procedures should be improved upon and made to pay attention to risks and continuously scan the environment in order to consolidate the benefit of change.
Banks, among the first essential elements of financial markets, are not adequate for the environment and the economy anymore as they carry out efficient and effective transactions. Banks can indirectly intervene in environmentally friendly issues such as ecological balances, climate change, and stopping carbon emissions. In this context, sustainable banking is important. Borsa Istanbul (BIST) has been calculating the BIST Sustainability Index (XUSRD) since November 4, 2014. The study includes nine banks that are eligible to be included in the BIST Sustainability Index. One of these banks is Albaraka Turk. It was the last bank to enter the index on 01.11.2019. For this reason, the study evaluated the performance in two years between 2020-2022. In the analysis of the study, five criteria from financial ratios were determined. In the evaluation, the WEDBA (Weighted Euclidean Distance Based Approach) method was applied, which is one of the Multi-Criteria Decision Making (MCDM) methods, combined with the entropy method. In the study, the weights of the criteria used to evaluate the banks were calculated by the entropy method. According to the criteria evaluated at the end of the study, the performance ranking of the banks included in the BIST sustainable index was obtained for the period examined.
ÖZET
Finansal piyasaların temel unsurlarından ilk sırasında yer alan bankalar, günümüzde sadece verimli ve etkin işlemlerini yapmaları çevreye ve ekonomiye yeterli olamamaktadır. Bankalar; ekolojik dengeler, iklim değişikliği, karbon salınımını durdurabilme gibi çevre dostu konularda dolaylı olarak müdahalede bulunabilmektedirler. Bu bağlamda sürdürülebilir bankacılık önemlidir. Borsa İstanbul’da (BIST), 4 Kasım 2014 tarihinden bu yana BIST Sürdürülebilirlik Endeksi (XUSRD) hesaplamaktadır. Çalışmada BIST Sürdürülebilirlik Endeksinde yer almaya hak kazanmış dokuz banka yer almaktadır. Bu bankalardan Albaraka Türk. 01.11.2019 tarihinde endekse giren son bankadır. Bu nedenle çalışma 2020-2022 tarihleri arasında iki yılı kapsayan bir periyotta performansları değerlendirilmiştir. Çalışmanın analizinde finansal oranlardan beş ölçüt belirlenmiştir ve değerlendirmede Çok Kriterli Karar Verme (ÇKKV) yöntemlerinden olan WEDBA (Weighted Euclidean Distance Based Approach) yöntemi entropi yöntemiyle birleştirilmiş uygulamasından yararlanılmıştır. Çalışmada, incelenen bankaların değerlendirilmesinde kullanılan kriterlerin ağırlıkları entropi yöntemi ile hesaplanmıştır. Çalışma sonunda değerlendirilen kriterlere göre BİST sürdürülebilir endekste yer alan bankaların performans sıralaması incelenen dönem için elde edilmiştir.
Commercial banks serve as key financial intermediaries in facilitation of the flow of money in the banking industry. Commercial banks offer credit to investment banks in order to offer investment opportunities for risky investments especially for financial securities using depositors’ money. Globally, banks are affected by broad difficulties in the operating environment. The banking industry has embraced innovation to sustain competitiveness. Financial innovations used by commercial banks revolve around the latest product, service and its conveyance to consumers. Consequently, this information influenced the research with its aim as; investigating innovative banking applications and monetary capability of banks. Particular goals included examining how; real time gross settlements (RTGS), electronic fund transfers (EFT), pay bill innovation in mobile banking and the extent of agency banking influence monetary potential of banks. Research anchored on the Schumpeter theory of innovations, the agency and bank-led theories. It was explanatory in nature and applied a census approach to gather information. The targeted group included commercial banks registered under the Central Bank totalling to 42 tiers 1. Raw and derived data was equally utilized including, financial statements and face to face interviews with top level managers. Collected information was examined by SPSS. Given conclusions were dispensed descriptively, and by inferring to statistical presentations. The resulting conclusion was that; when RTGS, agency banking, EFT, and mobile banking are solely brought up/down by a single unit, financial performance increased/ decreased by 0.163, 0.27, 0.197, and 0.318 units. At a constant however, financial performance remained at 0.236 out of 5 units. In conclusion, commercial in banks have significantly relied on innovative banking practices to shift their financial performance to new heights. The study has particularly placed both mobile and agency banking at a more central position in driving financial performance to the desired level than other factors including the RTGS and EFT. As part of the recommendations, managements of commercial banks should consider scaling up their adoption of RTGS, agency banking, EFT, and mobile banking as ways of reducing the operating cost of their respective banks reducing banking hall congestions since most of the frequently sought banking services can be achieved without one on one meeting with the bank tellers. Management should also consider adopting more innovative banking practices besides those this research investigated.
The study examines the effect of specific determinants of capital adequacy ratio of quoted deposit money banks in Nigeria. Ex-post facto research design was adopted using panel data of ten years (2010-2019) to explore the effect of independent variables (credit risk, liquidity, leverage, profitability, bank size, and loan growth) on the dependent variable (capital adequacy ratio). The population of the study is the 14 banks quoted as at 2019. Purposive sampling method was used to select all banks provided they have consistent data set. Thus 13 quoted banks were used. The study made use of secondary data from banks’ annual reports and accounts of the listed deposit money banks in Nigeria, and the CBN Bulletin. Panel regression was used and found out that, credit risk is significant positively related to Capital Adequacy Ratio of quoted DMBs in Nigeria. Liquidity is insignificant and positively related to Capital Adequacy Ratio of quoted DMBs in Nigeria. Financial leverage is insignificant and negatively related to Capital Adequacy Ratio of quoted DMBs in Nigeria. Profitability is significant and positively related to Capital Adequacy Ratio of quoted DMBs in Nigeria. Bank size is insignificant and positively related to Capital Adequacy Ratio of quoted DMBs in Nigeria. Loan growth is significant and positively related to Capital Adequacy Ratio of quoted DMBs in Nigeria. This implies that, CAR of quoted DMBs in Nigeria increases significantly as loan growth increases. Based on the findings of the study, it is concluded that, increase in default or nonperforming loans increases the degree and extent of capital adequacy ratio of quoted deposit money banks in Nigeria to serve as a buffer to any negative shock resulting from nonperforming loans and advances. The study recommends among others that, Quoted DMBs in Nigeria should try to put in place more stringent rules that will ensure all loans and advances to be given out to customers are adequately perused and assessed to avoid and reduce issue of nonperforming loans resulting from default. This will go a long way in reducing default risk such that money kept as CAR will be reduced in order to increase the liquidity of the banks for better profits.
Every firm operating in a dynamic and competitive environment must employ competitive strategies in order to enhance performance and remain relevant to the market. The automotive industry in Kenya has experienced shifts within the last couple of years that have disadvantaged automotive firms’ sales and this despite adequate capacity to supply local demand. Consequently, a persistent decline in volume sales has negatively impacted performance of these firms in overall, reducing competition to price wars that are not a viable option in the long run. This study therefore, sought to investigate the effect of Porter’s generic strategies on performance of selected automotive firms in Nairobi City County, Kenya. The specific objectives of the study were; to determine the effect of cost leadership strategy on the performance of selected automotive firms in Nairobi county, Kenya, to investigate the effect of differentiation strategy on the performance of selected automotive firms in Nairobi county, Kenya and to establish the effect of focus strategy on the performance of selected automotive firms in Nairobi county, Kenya. The scope entailed a study of selected new vehicle firms in the automotive industry in Nairobi County, Kenya. The study was anchored on three theories that included the market based view, the resource based view of the firm and Porter’s diamond theory of national advantage. Descriptive research design was adopted. The study used simple random sampling to attain the sample size and data was collected through drop and pick method using semi structured questionnaires. To ensure reliability in the questionnaire, Cronbach’s alpha correlation coefficient was used where a level of above 0.7 confirmed internal consistency. Pilot testing was done on ten respondents and Pearson’s product correlation coefficient was used to check for correlation between the study variables. A multivariate regression model was used to determine the relative importance of each variable to the study. Data collected was presented in graphs, tables and charts and a conclusion of the study drawn. The study revealed that cost leadership was significant in influencing the organizations’ performance. The study also revealed that differentiation affected their organizations’ performance to a great extent. The study also revealed that the focus strategy improved the sales growth in the firms thereby resulting to overall organization performance. The study concluded that cost leadership was significant in influencing the organizations’ performance. The study also concluded that differentiation affected their organizations’ performance to a great extent. The study also concluded that the focus strategy improved the sales growth in the firms thereby resulting to overall organization performance. The study recommended that the government and other policy makers come up with policies and regulations meant to foster innovation in the automotive industry. Policies should also be put in place meant for the creation of an enabling environment for fair and market driven competition to take place. The study recommended that the management of the automotive firms should often review their pricing structures and be geared towards minimizing their operational costs so as to offer cost friendly vehicles to the clients. The study also recommended that the firms’ management ensure they develop quality vehicles and embrace differentiation strategy so as to remain competitive in the market. The study also recommended that the management fully adopt the focus strategy to help in improving the sales growth in the firms thereby resulting to overall organization performance as well as improving on the product innovation which would lead to improved market share.
Abstract
Banking sector is an important sector around the globe for supervision of financial resources. This sector should be financially sound and efficient to run the banking operations which eventually affect economic development. The banking sector of Pakistan comprises both conventional and Islamic banks. Islamic banking system is different from the conventional banking system in many ways. As Islamic banking is based on sharia laws, all of its transactions, dealings, product features and all other business approaches are based on sharia. On the other hand, Conventional banking system is highly based on a debtor-creditor relationship.
The purpose of this study was to examine whether the performance of interest free banking is different from interest based banking in Pakistan during 2010-2015 with respect to profitability, liquidity, risk and solvency, efficiency, assets quality and capital adequacy. The aim of the research work was to explore that which banking system is currently performing better than other and to enlighten their financial performances.
This comparative study might be helpful in providing precious information to bank management, customers and regulatory authorities. For the accomplishment of the study, there was a sample of 5 Islamic and equally 5 conventional banks have been taken. Financial ratios analysis has been used to measure the financial performance of the chosen banks for the period of 2010-2015. Financial ratios have been calculated to measure these performances in term of profitability, liquidity, risk and solvency, capital adequacy, operational efficiency and assets quality. Financial ratios have been estimated from annual reports and financial statements i.e. Income statement and Balance sheet for the period of 2010 to 2015.
The findings of the study concluded that performance of interest free Islamic banks in term of volume is lesser than interest based conventional banks of Pakistan. While conventional banks have large volume of rupee business as compared to Islamic banks. The findings also indicated that Islamic banks proved to be more liquid, less risky and operationally efficient than conventional banks.
Key Words: Islamic banks, conventional banks, financial performance, profitability, liquidity, risk and solvency, operational efficiency, assets quality, capital adequacy.
Though commercial banks continue to invest in rolling out branches that are complimented by various delivery channels, the challenge of access to formal financial services by customers remains a big impediment to the banks’ financial performance. To address these challenges, the Central Bank of Kenya released a legislation that allows commercial banks to contract third party retail networks as alternative financial delivery channel players which were to cater for
80% of the banking population by 2013. However, to date only 38% of the set target has been realized and it is not clear whether or not the realized proportion has any significant contribution on the banks’ performance. It was on that basis that the study sought to establish the effect of financial delivery channels on performance of commercial banks in Kenya. Specifically the study sought to: establish the effect of mobile banking on the performance of commercial banks in Kenya, to establish the effect of agency banking on performance of commercial banks, and to establish the effect of internet banking on performance of commercial banks. The study adopted correlation research design and was guided by the Agency theory. Primary data were gathered using both structured and semi-structured questionnaires. These were supplemented with secondary data gathered from the banks’ published reports. Out of 33 commercial banks, Data from three banks were used for pretesting and a total of 30 commercial banks were visited during the actual data collection and the branch managers were interviewed. The study estimated an R2 of 0.501, implying that 50.1% of changes in the bank’s performance are explained by the independent variables. It further revealed that mobile banking (β = 0.402, p =0.001) and agency banking (β = 0.179, p = 0.050) had significant positive effects on banks performance. It is thus, recommended that use of mobile banking and agency banking be enhanced for improved performance. The study findings may help the bank managers in the financial planning and provide literature for further research in the banking sector.
This study is to explore the effect of the various aspects of e-money on the non-financial performance of banks. The population included all clients of Bank Mellat in the capital of Tehran, who use e-money services. A random sample of 404 of the clients was selected. Further, to collect data, the researchers developed a questionnaire with a Cronbach’s Alpha of 0.891, which was validated by university lecturers and experts in banking and structural analysis. In order to analyze the problem and test the conceptual model of the study, factor analyses of first and second ranks, as well as path analysis were utilized. Throughout the research process, e-money was categorized into card-based and network-based types, and the non-financial performance of banks was measured in three indices of customer satisfaction, diversity of services offered by the banks, and the quality of those services. Findings suggest that e-money affects the non-financial performance of banks and its sub-factors, where the effect is more conspicuous on customer satisfaction and quality of services, compared to service diversity.
The purpose of this research is to study and analyze the determinant factors of commercial banks’ interest margin in Indonesia, both internal factors (bank specific factors) and external factors. Internal factors are selected under this study consists of several aspects such as growth of the bank's assets, profitability, efficiency, capital adequacy, liquidity, and risk, meanwhile external factors are market power, inflation, and interest rates. Several variables have been used in previous studies to be used as a proxy. The study applied fixed effects on a panel data regression model to a panel of Indonesian commercial banks that covers the period 2008-2012. The results show consistent findings from previous studies. The net interest margin of Indonesian commercial banks are affected by the entire internal variables on a different level of significance, meanwhile inflation is the only external factors that affects on interest margins significantly at 5% level.
The main goal of this paper is to analyze the impact of the 2008 global financial crisis on the Ukrainian financial system, and on Ukrainian bank performance. Our analysis is based on key bank performance
indicators from 2003-2011. Bank assets, liabilities and capital are analyzed, and changes in bank management are taken into consideration. Special attention is paid to changes in bank stock prices of two of the largest banks, following the crisis.
Business valuation through DCF is recognized as one of the most popular valuation approaches. DCF valuation models, however, have become extremely complex. Modeling requires plenty of input data to be processed, the process is done in many stages, and the data obtained on each of the stages may be interrelated. The process then is not simply a chain of tasks. The modern models work via sophisticated mechanisms of loops being triggered whenever a new piece of information is revealed and the whole model needs updating. Technically speaking, in the spreadsheets environment, this may only be done with the use of iterations. The valuation model should also be subjected to the sensitivity analysis, which is able to quantify the impact of every single assumption made on the final company value. The analysis points out the set of critical assumptions, which have the major impact on the calculated company’s value. Apart from quantifying the impact of the assumptions, the analysis runs qualitative checks on the assumptions assessing the robustness of the arguments standing behind the critical factors for valuation. Consequently, the sensitivity analysis improves the objectivity of the model and mitigates the exposure for the possible results manipulation. The sensitivity analysis reveals its critical role in the valuation process and proves that it should be considered as the standard step in every DCF valuation.
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