Explain the Effects of Loan Losses and Deposit Costs on the Growth of Bank Profitability

Subject Areas : Journal of Investment Knowledge

zahra Rahmani ¹ (Ph.D. Student, Department of Industrial Management, Tehran Markazi branch, Islamic Azad University, Tehran, Iran.)
Mohammad Ebrahim Mohammad Pourzarandi ² (Professor, Department of Industrial Management, Tehran Markazi branch, Islamic Azad University, Tehran, Iran.)
Muhammad Ali Karamati ³ (Assistant Professor, Department of Industrial Management, Tehran Markazi branch, Islamic Azad University, Tehran, Iran.)

Received: 2021-05-17 Accepted : 2021-06-27 Published : 2023-12-22

Keywords: Loan repayment losses, Deposit fees, Capital Bank, Profitability growth in Capital Bank,

Abstract :

The bank’s real profitability by adsorbing the deposits, payment loans, and making investments may create cash flows different from what has been anticipated for the apportioned budgets. In line with this, the banks must predict cash flows and factors influencing their profitability. The present study tries to investigate and elucidating the effects of loan repayment losses and deposit costs on the growth in the banks’ profitability.Since there is no model for measuring the loan payment losses and deposit costs, the present study engages in designing and pretesting of models for measuring the loan payment losses and deposit costs based on Iran’s banking; then, the designed models will be used for measuring the loan payment losses and deposit costs. GMM-based multiple-regression is the method used herein along with the financial statements of Sarmayeh Bank as well as central bank’ information for a time span from 2011 to 2019.Corresponding to this research’s results, the loan payment losses and deposit costs are factors influencing the profitability of Sarmayeh Bank. In other words, the increase in the loan payment losses and the deposit costs brings about reductions in the profitability rate of Sarmayeh Bank.

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