Abstract:
This study aims to develop a profitability model for a commercial bank, i.e. Habib Bank
Limited, by considering a set of firm-specific variables for their impact on the profitability of the
bank to find out which variables serve best as determinants of profit for HBL, also to find out a
relevant trend (if any), which could help in future forecast & improved performance.
The variables from within HBL’s financial statements include deposits, advances, and
non markup interest income. The external variables such as GDP, inflation rate & interest rates
to study the impact of economic conditions & regulatory conditions on HBL’s profitability were
not tested but considered. This analysis was done using Minitab, through a regression model.
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The distinction to be noted in this study is that it uses higher number of observations as in 8
years’ quarterly data, for better predictability.
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It was found that HBL’s profit is majorly composed of the function of deposits,
investments & non markup interest income. Where increasing deposits are increasing the
turnover, higher investments result in higher income to a certain extent & non markup income is
directly increasing profits. This implies that HBL focus on improving service quality & better
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investment management.
