Profitability and Efficiency of Foreign and Domestic Banks: A Case Study of Pakistan

Abstract

This study examines the profitability and efficiency of domestic and foreign banks of Pakistan during 2006-2010. The type of ownership of banks was divided into domestic and foreign banks. To measure the profitability and efficiency, we used interest spread, net interest margin, return on equity and return on assets and non-interest income to total assets and net interest income to total assets ratios. This study used the secondary data obtained from Financial Statements Analysis of Financial Sectors 2006-2010 published by State Bank of Pakistan. By applying different tests, we have found that although foreign banks are performing very good but the net result show that the profitability of domestic banks was higher and better as compared to foreign banks in Pakistan.

Keywords: Profitability Efficiency, Domestic Banks, Foreign Banks