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Non-interest Income and Profitability: A Case of Pakistani Banks

Author

Listed:
  • Javaid, Shahid Hussain
Abstract
This paper examines the impact of non-interest income on bank performance for Pakistan. The study used Auto regressive distributed lag (ARDL) method on quarterly data from 2011 to2021 for this purpose. The results show that decrease in non-interest income decreases the profitability of Pakistani banks. Furthermore, analyzing the components of non-interest income, it is found that decrease in income from dividend and foreign currency led to this decrease in profitability whereas fees & commission showed negative impact on performance. This suggests that commercial banks may increase the foreign currency earnings and dividends to enhance their profitability. This study may be helpful for commercial bankers, State bank of Pakistan and other financial institutions to build up non-interest income framework and policies.

Suggested Citation

  • Javaid, Shahid Hussain, 2021. "Non-interest Income and Profitability: A Case of Pakistani Banks," MPRA Paper 117425, University Library of Munich, Germany, revised 2022.
    • Handle: RePEc:pra:mprapa:117425
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    References listed on IDEAS

    as
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    5. Iraj Noor & Danish Ahmed Siddiqui, 2019. "Evidence of Non-Linear Relationship between Non-Interest Income and Profitability of Commercial Banks in Pakistan," Asian Journal of Economic Modelling, Asian Economic and Social Society, vol. 7(1), pages 14-26.
    6. Robert DeYoung & Tara Rice, 2004. "Noninterest Income and Financial Performance at U.S. Commercial Banks," The Financial Review, Eastern Finance Association, vol. 39(1), pages 101-127, February.
    7. Iraj Noor & Danish Ahmed Siddiqui, 2019. "Evidence of Non-Linear Relationship between Non-Interest Income and Profitability of Commercial Banks in Pakistan," Asian Journal of Economic Modelling, Asian Economic and Social Society, vol. 7(1), pages 14-26, March.
    8. Sehrish Gul & Faiza Irshad & Khalid Zaman, 2011. "Factors Affecting Bank Profitability in Pakistan," Romanian Economic Journal, Department of International Business and Economics from the Academy of Economic Studies Bucharest, vol. 14(39), pages 61-87, March.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    non- interest income; bank profitability ARDL; financial stability;
    All these keywords.

    JEL classification:

    • E40 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - General
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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