DETERMINANTS OF PROFITABILITY OF HABIB BANK LIMITED A RESEARCH PAPER

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. i 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. ! 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 : '! investment management.