'DETERMINANTS OF PROFITABILITY OF PAKISTANI COMMERCIAL BANKS"

Abstract

Purpose: The objective of this research study is to analyze the profitability determinants of Pakistani commercial banks over the period from 2008 to 2012. Methodology/sample: There are several external and internal factors that have effect on banks’ profitability/return on assets. But in this research study only internal factors i.e. size of bank, deposits, capital adequacy, liquidity and cost efficiency were taken. Descriptive statistics such as mean, median, maximum, minimum, and standard deviation were used to analyze the impact. Other statistical techniques such as correlation, regression analysis and natural logarithm of total assets were used. Findings The findings of this research study are that the result shows that capital adequacy, liquidity and cost efficiency are those variables that are decided the Pakistani commercial banks’ profitability. On the other side variables such as size of banks and deposits do not impact on the profitability of commercial banks operating in Pakistan. Practical Implications The results of this research are useful for the banking industry. It has specifically identified the factors which are important for the profitability of the banks.