Abstract:
Banks as a part of the financial institutions are the main pillar of the economy. In the study, we
examine the impact of different internal as well as the external factors that affect the profitability
of banks in Pakistan. For this purpose five year (2008-2012) data of the ten commercial banks in
Pakistan is taken. In the study five independent and one dependent variable are taken two of
which are internal and remaining three are external factors. Internal factors include the corporate
taxes, and the inter bank loans while the external factors are inflation, interest rates, and the
Gross Domestic Product (GDP). Ordinary Least Square model is applied on the date on the SPSS
software. The results of the study shows that out of the five, two independent variables show the
strong and the significant correlation on the dependent variable and the other three variables
shows weak correlation on the dependent variable. All the five independent variables are
positively correlated to the bank profits. Two of these independent variables have strong
correlation but the other three have not a very strong correlation with bank profits. If we consider
more years’ data, add the other banks, which are not included in the study, and there are many
more internal and the external variable which are not included in the study, then the results will
become more accurate.
