ANALYZING THE CHANGING PROFIT STRUCTURE OF TURKISH BANKS: THE EFFECTS OF FEE AND COMMISSION INCOME SHIFT ON BANKS’ PERFORMANCE

Abstract

The aim of this study is to reveal the effect of fee and commission income, which are among the non-interest income items of banks in the Turkish banking sector, on the performance of banks. In this context, data from 8 banks in Turkish banking sector were analyzed by using quarterly data from 2003 to 2020. In the research model, the relationship between the market values and net profitability of banks and the ratio of interest income to fees and commissions is analyzed. Based on the structure of the dataset and preliminary analysis findings, Long and Short-Run Average Group Estimation Results were produced by using the Westerlund Cointegration test. Subsequently, the relationship between the findings was analyzed using the Dumitrescu and Hurlin causality test. According to the research findings, there is an increase in the net profits of the banks that increase their fee and commission income in the short term, but this increase is not reflected in the market value. On the other hand, both net profits and market value of these banks are observed to be low in the long term. In the long run, it is reported that banks focusing on interest income have increased both their net profits and market values. According to these results, it can be said that focusing on fee and commission income will not be the right strategy for value maximization in the banking sector.