39712387 Determinants of Profitability in Banking Sector of Pakistan

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Determinants of Profitability in banking Sector of Pakistan

if the Capital Adequacy is increased, the ROA of a bank will

be decreased and vice versa).

5.2.Recommendations

On the basis of above conclusions drawn in which Leverage andTax Rate affects positively and Capital Adequacy affects

negatively upon ROA, some recommendations are helpful:-

Government should take measures to stabilize the Tax

Rate in the country to give strength to the banking

sector in Pakistan and hence increasing the investment

trend, which will improve our economy.

State Bank of Pakistan should make such policies aboutCapital Adequacy of banks to strengthen the banks

Return on Assets, which will alternatively increase

their profitability.

As far as the banks own policies and strategies are

concerned, they should adopt such measures which will

lessen the impact of Leverage, Tax Rate and Capital

Adequacy to keep their profitability level high.

5.3.References

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posted 07

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Dietrich J. K. and James C., (1983), Regulation and theDetermination of Bank Capital Changes, The Journal of Finance, Vol. 38, No. 5 ,pp. 1651-1658

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Hodder L., McAnally M. L. & Weaver C. D., (2003), TheInfluence of Tax and Nontax Factors on Banks'Choice of Organizational Form, The Accounting Review, Vol. 78, No. 1, pp. 297-325

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5.4.Annexures

Annexure -1

List of Selected Banks

Sr. No. Bank Name

49
http://findarticles.com/p/search/?qa=R.K.%20Vyashttp://findarticles.com/p/search/?qa=Manmeet%20Singhhttp://findarticles.com/p/search/?qa=Ravindra%20Yadavhttp://findarticles.com/p/articles/mi_6771/http://findarticles.com/p/search/?qa=R.K.%20Vyashttp://findarticles.com/p/search/?qa=Manmeet%20Singhhttp://findarticles.com/p/search/?qa=Ravindra%20Yadavhttp://findarticles.com/p/articles/mi_6771/


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1 Askari Bank

2 Bank Alfalah

3 Muslim Commercial Bank

4 Standard Chartered Bank5 National Bank of Pakistan

6 Habib Bank Limited

7 Bank Al Habib

8 United Bank Limited

9 Allied Bank Limited

10 JS Bank

Annexure -2

ASKARI BANK LIMITED

YEARS LEVERAGE TAXRATECAPITAL

ADEQACY ROA

2005 0.939 0.410 0.110 0.016

2006 0.933 0.350 0.109 0.014

2007 0.933 0.350 0.094 0.015

2008 0.937 0.350 0.092 0.002

2009 0.941 0.350 0.118 0.005

Annexure -3

ASKARI BANK LIMITED


ADEQACY ROA

2005 0.970 0.410 0.087 0.840

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2006 0.956 0.350 0.095 0.670

2007 0.951 0.350 0.099 1.040

2008 0.951 0.350 0.080 0.380

2009 0.943 0.350 0.125 0.240

Annexure -4

MCB LIMITED


ADEQUACY ROA

2005 0.922 0.410 0.125 0.032

2006 0.881 0.350 0.187 0.038

2007 0.866 0.350 0.168 0.041

2008 0.868 0.350 0.163 0.036

2009 0.863 0.350 0.191 0.033

Annexure -5

STANDARED CHARTERED BANK LIMITED

YEARS LEVERAGE TAX

RATE

CAPITAL

ADEQUACYROA

2005 0.874 0.410 0.200 0.039

2006 0.836 0.350 0.100 0.032

2007 0.831 0.350 0.115 0.012

2008 0.838 0.350 0.099 0.003

2009 0.847 0.350 0.116 0.003

Annexure -6

NATIONAL BANK OF PAKISTAN


ADEQACY ROA

2005 0.870 0.410 0.154 0.034

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2006 0.870 0.350 0.165 0.043

2007 0.850 0.350 0.201 0.027

2008 0.870 0.350 0.166 0.020

2009 0.870 0.350 0.168 0.021

Annexure -7

HABIB BANK LIMITED


ADEQUACY ROA

2005 0.923 0.410 0.099 0.026

2006 0.910 0.350 0.129 0.032

2007 0.909 0.350 0.136 0.022

2008 0.912 0.350 0.144 0.023

2009 0.902 0.350 0.133 0.025

Annexure -8

BANK AL-HABIB

YEARS LEVERAGE TAXRATE CAPITAL ADEQUACY ROA

2005 0.943 0.410 0.090 0.022

2006 0.943 0.350 0.099 0.023

2007 0.941 0.350 0.111 0.022

2008 0.934 0.350 0.113 0.020

2009 0.943 0.350 0.125 0.018

Annexure -9

UNITED BANK LIMITED


ADEQUACY ROA

2005 0.938 0.410 0.098 0.027

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2006 0.929 0.350 0.111 0.034

2007 0.920 0.350 0.109 0.025

2008 0.928 0.350 0.099 0.023

2009 0.902 0.350 0.132 0.023

Annexure -10

ALLIED BANK LIMITED


ADEQUACY ROA

2005 0.932 0.410 0.930 0.025

2006 0.930 0.350 0.930 0.026

2007 0.938 0.350 0.940 0.000

2008 0.939 0.350 0.940 0.017

2009 0.928 0.350 0.930 0.025

Annexure -11JS Bank

YEARS LEVERAGE TAX

RATE

CAPITAL

ADEQUACYROA

2005 0.750 0.410 0.025 0.076

2006 0.761 0.350 0.391 -0.033

2007 0.744 0.350 0.340 0.002

2008 0.760 0.350 0.289 0.003

2009 0.828 0.350 0.240 -0.018

1. Askari Bank

Model Summary

Model RR

SquareAdjustedR Square

Std. Errorof the

Estimate1 .940 a .884 .537 .004372

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a. Predictors: (Constant), CAR, Tax Rate, Leverage

ANOVA b

ModelSum of

Squares dfMean

Square F Sig.

1 Regression

.000 3 .000 2.548 .4245 a

Residual .000 1 .000

Total .000 4

a. Predictors:(Constant),Capital Adequacy, Leverage, Tax rate

b. Dependent Variable: Return on Assets

Coefficients a

Model

Un-standardizedCoefficients

StandardizedCoefficients

t Sig.BStd.

Error Beta

1

(Constant) 1.616 0.698 2.317 0.259

Leverage -1.813 0.767 -1.009

-2.36

4 0.255Tax Rate 0.177 0.088 0.738 2.006 0.294

CAR 0.271 0.237 0.471 1.145 0.457a. Dependent Variable: Return on Assets

2. Bank Alfalah

Model Summary

Model R R SquareAdjusted R

Square

Std. Errorof the

Estimate1 .661 a .437 -1.253 .491138

a. Predictors:(Constant),CAR, Tax Rate, Leverage

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ANOVA b

ModelSum of

Squares dfMean

Square F Sig.

1 Regression .187 3 .062 .259 .856 a


Total .428 4

a. Predictors: (Constant), Capital Adequacy, Leverage, Tax rate

b. Dependent Variable: Return on Assets

Coefficients a

Model



t Sig.BStd.

Error Beta

1 (Constant) -46.002 69.415 -0.663 0.627

Leverage 52.701 79.414 1.608 0.664 0.627

Tax rate -11.743 24.516 -0.963 -0.479 0.716

CapitalAdequacy 6.176 22.818 0.324 0.271 0.832

a. Dependent Variable: Return on Assets

3. Muslim Commercial Bank

Model Summary

Model R R SquareAdjustedR Square

Std. Errorof the

Estimate1 .800 a .640 -.439 .004408

a. Predictors: (Constant), CAR, Leverage, Tax Rate

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ANOVA b

ModelSum of

Squares dfMean

Square F Sig.

1 Regression .000 3 .000 .593 .715 a


Total .000 4

a. Predictors: (Constant), Capital Adequacy, Leverage, Tax rateb. Dependent Variable: Return on Assets

Coefficients a

Model



t Sig.BStd.

Error Beta

1 (Constant) .028 .189 .150 .906

Leverage .191 .330 1.269 .578 .666

Tax rate -.376 .373 -2.744 -1.007 .498

Capital

Adequacy-.144 .189 -1.030 -.761 .586


4. Standard Charted Bank

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Model Summary

Model RR

SquareAdjusted R

SquareStd. Error ofthe Estimate

1 .803 a .645 -.418 .01995


ANOVA b

ModelSum of

Squares dfMean

Square F Sig.

1 Regression .001 3 .000 .607 .711 a


Total .001 4a. Predictors: (Constant), Capital Adequacy, Leverage, Tax rateb. Dependent Variable: Return on Assets

Coefficients a

Model



t Sig.BStd.

Error Beta

1 (Constant) .138 1.343 .103 .935

Leverage -.767 1.763 -.783 -.435 .739

Tax rate 1.622 2.058 2.598 .788 .575

CapitalAdequacy

-.467 1.273 -1.175 -.367 .776


5. National bank of Pakistan

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Model Summary


Square

Std. Errorof the

Estimate

1 .658 a .433 -1.270 .01449a. Predictors: (Constant), Capital Adequacy, Leverage, Tax rate

ANOVA b

ModelSum of

Squares dfMean

Square F Sig.

1 Regression .000 3 .000 .254 .858 a



Coefficients a

Model



t Sig.BStd.

Error Beta

1 (Constant) 5.397 6.717 .803 .569

Leverage -5.534 6.940 -5.146 -.797 .571

Tax rate -3.120 3.822 -5.755 -.816 .564

CapitalAdequacy

-.336 .500 -1.471 -.672 .623


6. Habib Bank Limited

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Model Summary



1 .852 a .726 -.095 .00409


ANOVA b

ModelSum of

Squares dfMean

Square F Sig.

1 Regression .000 3 .000 .884 .634 a



Coefficients a

Model



t Sig.B

Std.

Error Beta1 (Constant) -.135 .454 -.297 .816

Leverage .477 .605 .926 .788 .575

Tax rate -.518 .353 -3.554 -1.468 .381

CapitalAdequacy

-.673 .414 -2.962 -1.623 .352


7. Bank-Al-Habib

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Model Summary



1 .971 a .942 .769 .00096


ANOVA b

ModelSum of

Squares dfMean

Square F Sig.

1 Regression .000 3 .000 1.449 .303 a



Coefficients a

Model



t Sig.BStd.

Error Beta

1 (Constant) -.174 .155 -1.123 .463

Leverage .216 .162 .421 1.334 .410

Tax rate -.217 .058 -1.463 -3.750 .166

CapitalAdequacy

.115 .054 .991 1.130 .279


8. United Bank Limited

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Model Summary

Model RR

SquareAdjusted R

SquareStd. Error of the

Estimate

1 .885 a .783 .134 .00425

a. Predictors: (Constant), Capital Adequacy, Tax rate, Leverage

ANOVA b

ModelSum of

Squares dfMean

Square F Sig.

1 Regression

.000 3 .000 1.206 .570 a


Total .000 4a. Predictors: (Constant), Capital Adequacy, Tax rate, Leverageb. Dependent Variable: Return on Assets

Coefficients a

Model



t Sig.BStd.

Error Beta

1 (Constant) -1.168 1.349 -.865 .546

Leverage 1.164 1.297 3.461 .897 .534

Tax rate .227 .699 .672 .325 .800

CapitalAdequacy

.860 .759 2.585 1.133 .460


9. Allied Bank Limited

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Model Summary



1 .881 a .776 .102 .01044

a. Predictors: (Constant), Capital Adequacy, Tax rate, Leverage

ANOVA b

ModelSum of

Squares dfMean

Square F Sig.

1 Regression .000 3 .000 1.152 .580 a


Total .000 4a. Predictors: (Constant), Capital Adequacy, Tax rate, Leverageb. Dependent Variable: Return on Assets

Coefficients a

Model



t Sig.B

Std.

Error Beta1 (Constant) 1.503 1.025 1.466 .381

Leverage 3.800 6.600 1.683 .576 .667

Tax rate -.198 .393 -.483 -.505 .702

CapitalAdequacy

-5.310 6.356 -2.641 -.835 .557


10. JS BANK

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Model Summary

Model R

RSquare

Adjusted RSquare

Std. Error of theEstimate

1 .998 a .996 .982 .00558


ANOVA b

ModelSum of

Squares dfMean

Square F Sig.

1 Regression

.007 3 .002 1.804 .085 a



Coefficients a

Model



t Sig.B

Std.

Error Beta1 (Constant) .790 .252 3.135 .197

Leverage -.637 .129 -.516 -4.923 .128

Tax rate -.554 .411 -.355 -1.349 .406

CapitalAdequacy

-.365 .074 -1.233 -4.924 .128


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39712387 Determinants of Profitability in Banking Sector of Pakistan