IMPACT OF FOREIGN BANKS ON THE PERFORMANCE OF BANKING SECTOR IN PAKISTAN

Abstract

Purpose: The objective of the study is to analyze the impact of foreign banks and performing loans on the profitability of banking sector of Pakistan using secondary data. non Methodology: All the data will be taken from World Bank databases such as World Development Indicators (WDI) and Global Financial Development Indicator (GFDI) for the entire Pakistan centralized data. The sample period was selected between 1998 and 2017 due to consistent available annual data of Pakistan. Findings: The results have shown that foreign banks and economic growth have positively significant impact on bank profitability while bank deposit to GDP and nonperforming loans to GDP have negatively significant impact on bank profitability. However, natural log of foreign bank assets and real effective exchange rate have no effect on bank profitability. Conclusion: The inclusion of foreign bank’s assets and real effective exchange shown any noteworthy influence upon the profitability of banks. Thirdly, the general phenomenon has been accepted in this study as well that NPLs tends to mitigate the profitability of banking sector. Implications: The economists should focus rate of GDP is the determinant of improvements in many sectors and one ofthem is the Banking sector. rate has not on the increasing growth rate of GDP. A growing