IMPACT OF RATE OF INTEREST ON BANKS PROFITBAILITY: CASE OF PAKISTANI COMMERCIAL BANKS

Abstract

Purpose: The main aim of this research is to determine the factor which influences the bank’s profitability in Pakistani banks. The determinants of the profitability i.e. the variables includes (Interest rate, ROA & ROE). Based on these determinants highlighted in the literature review the researcher is examining their impact on banks profitability (Banks Profitability) Methodology / Sample: Deductive approach was applied and hypotheses were developed first after careful review of relevant literature. The nature of this study is quantitative and Data was collected through financial statements of banks while for the purpose of analysis, the researcher uses Simple Regression to determine the impact and relationship. The sample size of 7 commercial banks listed in PSX 100 index are the target population for this research. Findings of the Research: The results of my study indicate that there is a significant impact of Liquidity, Inflation and concentration ratio on banks profitability while the (Non-Performing Loans, Administrative Cost, GDP & Market Share) has insignificant relationship with profitability. This means that, the firms should pay strong attention to Liquidity, Inflation and concentration ratio in order to improve its profitability over the period of time. For inflation rate the bank need to devise ways as it is an uncontrollable variable.