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Determination of the Optimal Level of Lending in Turkish Banking Sector

Keywords: Bankings , Lending , Profitability ratios , Financial performance

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Abstract:

Banking sector has a great importance in a national economy. Banks provide the vital function of mobilizing savings from those who have it and allocating such savings to those who wish to borrow to invest in economic development. When these two cardinal functions are not effectively provided by a country’s banking institutions, then its economic performance is seriously hampered. Main duty of banks is to accept deposits and channel those deposits into lending activities, either directly or through capital markets. In this study it is tried to determine if there is any correlation between the level of lending and the level of profitability. In addition to that, optimal level of lending is tried to be determined. Total lendings / total assets which is the best indicator of asset quality is accepted as independent variable and net income / total asset (return on assets), net income / equity (Return on equity) are accepted as dependent variable. Between those variables regression and correlation analyse are done .

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