Presented at the Ist International Symposium on Innovative Approaches in Scientific Studies (ISAS 2018), Kemer-Antalya, Turkey, Apr 11, 2018

SETSCI Conference Proceedings, 2018, 2, Page (s): 35-35 , https://doi.org/

Published Date: 23 June 2018    | 1251     13

The most fundamental role of the banking system is to direct funds into the real sector. In all country economies around the world, banks play an important role in transforming savings into investments by acting as a bridge between the financial sector and the real sector. Banks from financial intermediation institutions are institutions that enable savings to be collected and turned into investment, to evaluate investment projects, to supervise and follow the managerial positions and to obtain detailed information about the companies at less cost. According to Schumpeterian economic advocates, banks are institutions that facilitate technological progress. The development of financial intermediaries affects economic growth positively. Profitability of banks is thought to contribute to economic development. For this purpose, the purpose of this study, Turkey is to investigate the relationship between economic performance and growth of deposits in banks operating in the banking sector. Quarterly data for 2003: Q1 and 2016: Q4 were used in the study. As the analysis method, Least Squares Method is preferred. In determining the relationship between economic growth and bank performance, two different models were created. The GDP series are taken as dependent variables, while the average ROA and ROE are taken as independent variables, which are considered to be indicative of bank profitability. The results obtained from the least squares method revealed a positive and significant relationship between the average return on assets of the deposit banks and the average equity and GDP. An increase of one unit from the Bank's profitability indicators in RAO and ROE will result in a change of +1.37 and +1.29 respectively in GDP. The Engle-Granger causality method was used in analyzing the causality relation between variables. The results from the analysis show that there is a causal relationship between bank profitability and economic growth and that there is no causality if the economic growth is towards bank profitability ratios. In other words, while bank profit margins are a cause of change in GDP, GDP is not a reason for bank profitability ratios. More savings should be transformed into more investment, capital must be transferred to the most productive area, foreign direct investment, debts, etc. should be transferred to the bank, because the bank's profitability contributes positively to economic growth. the entry of foreign capital into the country should be facilitated.  

Keywords - ROA, ROE, GDP, Engle-Granger