B.Sc. In Business and Management
5093335933450-152400819150DT365A
College of business (DIT)
Faculty of financial &Administrative sciences (FFAS)
The Effect of the liquidity on the profitability into the commercial banks in the Egypt
A dissertation submitted in partial fulfillment of the requirement for the degree BSc. Business and management of the Dublin institute of technology (DIT) in partnership with Pharos University in Alexandria (PUA)
Submitted by:
Amr Mohamed ElsayedSupervisor
Miss. Nourhan El_hossaryTable of Contents pages
Declaration…………………………………………………..5
Acknowledgment…………………………………………….6
Abstract………………………………………………………8
Chapter 1
1.1 Introduction……………………………………………….9
1.2 Research problem …………………………………………………….10
1.3 Research Question …………………………………………… 11
1.4 Research objectives ……………………… ……………….… 11
1.5 The research importance ………… ……………………………11
1.6 Research plan …………………………………………………..12
Chapter 2
2.1 preface …………………………………………………14
2.2 The Profitability………………………………………….14
2.3 Theories of the liquidity …………………………15
2.3.1 Commercial loan theory …………………………………15
2.3.2 Anticipated income theory ………………………………16
2.3.3 Financial intermadian theory………………………………16
2.3.4 Shift ability theory ………………………………………..17
2.3.5 lib/liquidity management theory………………………….17
2.3.6 Liquidity preference theory ………………………………17
2.4 The factors influencing the profitability…….. 18
2.4.1 Capital strengths…………………………………………..18
2.4.2 CR…………………………………………………………..19
2.4.3 Market power …………………………………………19
2.4.4 Cost …………………………………………………………19
2.5 macroeconomic factors ………………………..20
2.5.1 Growth in GDP ……………………………………….20
2.5.2 Inflation………………………………………………………………20
2.5.3 Monetary policy ………………………………… …..21
2.5.4 Interest spread …………….. ………………………………..21
2.5.5 Deposits insurance ………………………………………………21
2.6 The liquidity ……………………… ………..22
2.7 Relationship between liquidity and profitability . . .……23
Chapter three
3.1 preface ……………………………………………………….26
3.2 Research design ………………………………………………..26
3.3 Research model ………………………………………………..26
3.4 Research variables and measurements..……………………27
3.4.1 Independent variables …… ……………………………………27
3.4.2 Dependent variable …………………………………………….27
3.5 Sample size ………………………………………………………27
3.6 Data collection ……………………………………………………27.
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3.6.1 Banks profiles ………………………………………………….28
3.6.1.1 Commercial international bank (CIB) .……………28
3.6.1.2 ARAB BANKING CORPRATION (ABC) …….…28
3.6.1.3 EGYPT BANKING COPRATION (EGBE) … ……28
3.6.1.4 BARCLAYS BANK (PLC) ………………………..29
3.7 Summary and conclusion …………………………………29
Chapter four
4.1 Preface ……………………………………………………………31
4.2 Data analysis ………………………………………………31
4.2.1 The Ratios of the three banks ……………………………..32
4.2.2 Analysis of the liquidity into the banks …………………35
4.2.3 Ratios to measures of the liquidity ………………………35
4.2.4 Analysis of the profitability into the commercial banks ….36
4.2.5 Ratios to measure profitability ……………………………36
4.3 Research finding and discussion ……………………………..36.
4.4 Conclusions ………………………………………………………….37
4.5 limitations …………………………………………………………….37
4.6 Recommendations ………………………………………………….38.
References ………………………… ………………………………… 39
DeclarationI hereby certify that this material, which I now submit for assessment as the final year project on the programmed of study leading to the award of B. Sc. in Business and Management, is entirely my own work and has not been submitted in whole or in part for assessment for any academic purpose other than in partial fulfillment for that stated above.
Signed ……………………….Date ……………………………
AcknowledgmentI would like to express my honor and gratitude to my supervisor Ms. Nourhan E_lhossary for the invaluable support and commitment devoted in making this research project a reality. I would also like to give my sincere appreciation to my family and friends for their support and understanding during the period of the study
AbstractThis analysis check the result of the liquidity on the profitability within the commercials banks within the Egypt plays a crucial role by giving correct info to mirror the profitability role of affairs within banks. Though most commercials banks review plans however there’s some banks excess the necessity within the financial statement to advantages all the users of those info. This study is predicated on secondary knowledge assortment since they supply a lot of realistic conclusion to fulfill the objectives of the study. The info can principally be collected from revealed annual reports and financial statements of four commercials banks between the periods of the 2016_2017
The results of this paper has shown that the a lot of the extent of profitability and liquidity within the plan the a lot of are going to be the profitability into the commercial banks
Chapter One
Introduction
1.1Introduction
In this world, banks are the foremost powerful monetary institutions/sectors that play the many roles in economic development. Bank may be a corporation for raising the fund for the general public and giving client merchandise and securities on credit. It additionally discounts the bills for the required monetary institutions. The liquidity should be taken into thought as the most significant part at the bank to pay its current liabilities. It includes payment of duties and thus the various financial expenses that are thought-about as short term. If we tend to would like to increase profitability then we have got to sacrifice liquidity. At a similar time increased liquidity is about to air the worth of profitability. to keep within business banks the liquidity basically represents the aptitude to settle its commitments at maturity time. These commitments embody disposal and investment commitments; any fairly withdrawals, deposits created by account holders, and accumulated liabilitiesADDIN CSL_CITATION {“citationItems”:{“id”:”ITEM-1″,”itemData”:{“ISBN”:”3339167001″,”abstract”:”This study aims at investigating the relationship between liquidity and profitability of commercial banks in Pakistan. The main objective of the study is to find the nature of relationship and the strength of relationship exist between the variables. Correlation and regression are used respectively to find the nature of the relationship and extent of relationship between dependent and independent variables. Secondary data was used for analysis which was extracted from the last five years (2008-2014) annual accounts of Habib Bank Limited. After conducting correlation and regression analysis it was found that there as significant positive relationship between liquidity with profitability of the banks. Since, the data of the banking sector was used, hence the results cannot be generalized to other sectors. Keywords:”,”author”:{“dropping-particle”:””,”family”:”Khan”,”given”:”Rizwan Ali”,”non-dropping-particle”:””,”parse-names”:false,”suffix”:””},{“dropping-particle”:””,”family”:”Ali”,”given”:”Mutahhar”,”non-dropping-particle”:””,”parse-names”:false,”suffix”:””},”container-title”:”Global Journal of Management and Business Research: C Finance”,”id”:”ITEM-1″,”issue”:”1″,”issued”:{“date-parts”:”2016″},”page”:”101-111″,”title”:”Impact Of Liquidity On Profitability Of Commercial Bank In Pakistan : An Analysis On Banking Sector In Pakistan”,”type”:”article-journal”,”volume”:”16″},”uris”:”http://www.mendeley.com/documents/?uuid=bc7bea23-a9ae-4ccc-8a7c-bdf9dbd9aae7″},”mendeley”:{“formattedCitation”:”(Khan & Ali, 2016)”,”plainTextFormattedCitation”:”(Khan & Ali, 2016)”,”previouslyFormattedCitation”:”(Khan & Ali, 2016)”},”properties”:{“noteIndex”:0},”schema”:”https://github.com/citation-style-language/schema/raw/master/csl-citation.json”}(Khan ; Ali, 2016)
Banks have a distinctive structure and operating procedures relating to each liquidity and profitability among other things. Therefore, this individualism ought to be thought-about once analyzing the financial performance of these commercial banks; particularly however they manage their liquidity. Also, however, all this will have an effect on the activities related to the commercial banks’ profitability should be thought about. Further, have its own special economic and societal characteristics. This makes the commercial banks’ operations adding another layer to the distinctiveness of the issues this analysis tries to explore ADDIN CSL_CITATION {“citationItems”:{“id”:”ITEM-1″,”itemData”:{“DOI”:”10.5281/zenodo.583888″,”author”:{“dropping-particle”:””,”family”:”Abdulla Ibrahim Aziz, Atheer Anwar Sharif”,”given”:”Delan Ghafoor Salih”,”non-dropping-particle”:””,”parse-names”:false,”suffix”:””},”id”:”ITEM-1″,”issue”:”May”,”issued”:{“date-parts”:”2017″},”page”:”73-87″,”title”:”Liquidity Management and Profitability in Islamic Banks of Kurdistan Region of Iraq : Cihan Bank for I ….”,”type”:”article-journal”,”volume”:”5″},”uris”:”http://www.mendeley.com/documents/?uuid=3286dc3c-ed17-4aab-8484-a0a73a8cf068″},”mendeley”:{“formattedCitation”:”(Abdulla Ibrahim Aziz, Atheer Anwar Sharif, 2017)”,”plainTextFormattedCitation”:”(Abdulla Ibrahim Aziz, Atheer Anwar Sharif, 2017)”,”previouslyFormattedCitation”:”(Abdulla Ibrahim Aziz, Atheer Anwar Sharif, 2017)”},”properties”:{“noteIndex”:0},”schema”:”https://github.com/citation-style-language/schema/raw/master/csl-citation.json”}(Abdulla Ibrahim Aziz, Atheer Anwar Sharif, 2017)
Liquidity is the ability of a deposit cash bank to pay its short-term obligation to its depositors and creditors on demand or at maturity. On the opposite hand, profitability is that the life of the distinction between financial gain and therefore the bank in operating expenses. It may be terminated by the work that liquidity and profitability may be like two forces having differing objectives that in any respect times exert pressure to tug the bank ADDIN CSL_CITATION {“citationItems”:{“id”:”ITEM-1″,”itemData”:{“ISBN”:”3339167001″,”abstract”:”This study aims at investigating the relationship between liquidity and profitability of commercial banks in Pakistan. The main objective of the study is to find the nature of relationship and the strength of relationship exist between the variables. Correlation and regression are used respectively to find the nature of the relationship and extent of relationship between dependent and independent variables. Secondary data was used for analysis which was extracted from the last five years (2008-2014) annual accounts of Habib Bank Limited. After conducting correlation and regression analysis it was found that there as significant positive relationship between liquidity with profitability of the banks. Since, the data of the banking sector was used, hence the results cannot be generalized to other sectors. Keywords:”,”author”:{“dropping-particle”:””,”family”:”Khan”,”given”:”Rizwan Ali”,”non-dropping-particle”:””,”parse-names”:false,”suffix”:””},{“dropping-particle”:””,”family”:”Ali”,”given”:”Mutahhar”,”non-dropping-particle”:””,”parse-names”:false,”suffix”:””},”container-title”:”Global Journal of Management and Business Research: C Finance”,”id”:”ITEM-1″,”issue”:”1″,”issued”:{“date-parts”:”2016″},”page”:”101-111″,”title”:”Impact Of Liquidity On Profitability Of Commercial Bank In Pakistan : An Analysis On Banking Sector In Pakistan”,”type”:”article-journal”,”volume”:”16″},”uris”:”http://www.mendeley.com/documents/?uuid=bc7bea23-a9ae-4ccc-8a7c-bdf9dbd9aae7″},”mendeley”:{“formattedCitation”:”(Khan & Ali, 2016)”,”plainTextFormattedCitation”:”(Khan & Ali, 2016)”,”previouslyFormattedCitation”:”(Khan & Ali, 2016)”},”properties”:{“noteIndex”:0},”schema”:”https://github.com/citation-style-language/schema/raw/master/csl-citation.json”}(Khan ; Ali, 2016)
Profitability and liquidity unit two necessary variables that offer knowledge regarding the performance of any business entity. For semi-permanent survival and healthy growth, every profitability and liquidity has to be compelled to go parallel banks. Profitability is one among the most goals of any business. Whereas not being profitable it’s unthinkable for a business to survive and so the business growth is hard. To come back up with profit a business would really like short funds to fulfill its day to day needs in operations and totally different wants. Business square measure aiming to be further profitable once this short-term would really like funds is generated by the business operation, not through external debts. That the liquidity tells regarding the business capability to satisfy short-terms would really like of funds by the business and gain tells regarding the profit generated from the operations of the business.ADDIN CSL_CITATION {“citationItems”:{“id”:”ITEM-1″,”itemData”:{“abstract”:”-The purpose of this research paper is to know the relationship between two ratios of the financial statements i.e. profitability and liquidity. The study is focused on the banking sector. The relation is measured by current ratio, quick ratio, and net-working capital. The bank under study is standard chartered bank Pakistan. From the findings of this study we came to conclusion that there is weak positive relation between liquidity and profitability. Quantitative research design is used as tool for the study. To find the relation and strength of the relation correlation and regression are used. So companies need to focus on liquidity management which has a positive relation with the company’s profitability. Abstract-The purpose of this research paper is to know the relationship between two ratios of the financial statements i.e. profitability and liquidity. The study is focused on the banking sector. The relation is measured by current ratio, quick ratio, and net-working capital. The bank under study is standard chartered bank Pakistan. From the findings of this study we came to conclusion that there is weak positive relation between liquidity and profitability. Quantitative research design is used as tool for the study. To find the relation and strength of the relation correlation and regression are used. So companies need to focus on liquidity management which has a positive relation with the company’s profitability.”,”author”:{“dropping-particle”:””,”family”:”Ahmad”,”given”:”Rafiq”,”non-dropping-particle”:””,”parse-names”:false,”suffix”:””},”container-title”:”Global Journal of Management and Business Research”,”id”:”ITEM-1″,”issue”:”1″,”issued”:{“date-parts”:”2016″},”title”:”A Study of Relationship between Liquidity and Profitability of Standard Charterd Bank Pakistan: Analysis of Financial Statement Approach”,”type”:”article-journal”,”volume”:”16″},”uris”:”http://www.mendeley.com/documents/?uuid=1906509b-5142-40c9-b69b-0e9f55f4d449″},”mendeley”:{“formattedCitation”:”(Ahmad, 2016)”,”plainTextFormattedCitation”:”(Ahmad, 2016)”,”previouslyFormattedCitation”:”(Ahmad, 2016)”},”properties”:{“noteIndex”:0},”schema”:”https://github.com/citation-style-language/schema/raw/master/csl-citation.json”}(Ahmad, 2016)
Liquidity and profitability possess tremendous importance within the company world. Liquidity refers to the management of current assets and current liabilities of an organization. It plays the key role in method whether or not or not a bank is in a very position to effectively manage is brief term obligations. To its dire importance, it’s a necessity for banks to require care of a reasonable amount their assets at intervals the sort of money so as to satisfy their short-term obligations. Balanced liquidity level is essential for the effectiveness and profitability of banks.ADDIN CSL_CITATION {“citationItems”:{“id”:”ITEM-1″,”itemData”:{“ISBN”:”3339167001″,”abstract”:”This study aims at investigating the relationship between liquidity and profitability of commercial banks in Pakistan. The main objective of the study is to find the nature of relationship and the strength of relationship exist between the variables. Correlation and regression are used respectively to find the nature of the relationship and extent of relationship between dependent and independent variables. Secondary data was used for analysis which was extracted from the last five years (2008-2014) annual accounts of Habib Bank Limited. After conducting correlation and regression analysis it was found that there as significant positive relationship between liquidity with profitability of the banks. Since, the data of the banking sector was used, hence the results cannot be generalized to other sectors. Keywords:”,”author”:{“dropping-particle”:””,”family”:”Khan”,”given”:”Rizwan Ali”,”non-dropping-particle”:””,”parse-names”:false,”suffix”:””},{“dropping-particle”:””,”family”:”Ali”,”given”:”Mutahhar”,”non-dropping-particle”:””,”parse-names”:false,”suffix”:””},”container-title”:”Global Journal of Management and Business Research: C Finance”,”id”:”ITEM-1″,”issue”:”1″,”issued”:{“date-parts”:”2016″},”page”:”101-111″,”title”:”Impact Of Liquidity On Profitability Of Commercial Bank In Pakistan : An Analysis On Banking Sector In Pakistan”,”type”:”article-journal”,”volume”:”16″},”uris”:”http://www.mendeley.com/documents/?uuid=bc7bea23-a9ae-4ccc-8a7c-bdf9dbd9aae7″},”mendeley”:{“formattedCitation”:”(Khan & Ali, 2016)”,”plainTextFormattedCitation”:”(Khan & Ali, 2016)”,”previouslyFormattedCitation”:”(Khan & Ali, 2016)”},”properties”:{“noteIndex”:0},”schema”:”https://github.com/citation-style-language/schema/raw/master/csl-citation.json”}(Khan ; Ali, 2016)
Liquidity is that the ability of a deposit money bank to pay its short obligations to its depositors and creditors. On another hand, profitability is that the life of the excellence between the banks’ operative expenses and profitability. However, liquidity and profitability are likened to two centrifugal forces with contradictory objectives that in any respect times threaten to pull the bank apart. Much, profitability and liquidity is employed as objective indicators of not solely deposit money banks but all profit bound organizations.ADDIN CSL_CITATION {“citationItems”:{“id”:”ITEM-1″,”itemData”:{“abstract”:”The issue of liquidity-profitability trade off is well documented in the literature. This study was carried out to examine the liquidity-profitability trade off of deposit money banks in Nigeria. The study was carried on fifteen deposit money banks in Nigeria and covered a panel data of 2010 to 2012. Two models were specified and estimated using Ordinary Least Squares (OLS) technique. The empirical results revealed that there is a statistically significant relationship between bank liquidity measures-current ratio, liquid ratio, cash ratio, loans to deposit ratio, loans to asset ratio-and return on equity. However, when return on asset was used as proxy for profitability, the relationship became statistically insignificant. It was suggested that the banks should evaluate and redesign their liquidity management strategy so that it will not only optimize returns to shareholders equity but also optimize the use of the assets.”,”author”:{“dropping-particle”:””,”family”:”Bassey”,”given”:”Godwin E”,”non-dropping-particle”:””,”parse-names”:false,”suffix”:””},{“dropping-particle”:””,”family”:”Moses”,”given”:”Comfort Effiong”,”non-dropping-particle”:””,”parse-names”:false,”suffix”:””},”container-title”:”International Journal of Economics, Commerce and Management United Kingdom”,”id”:”ITEM-1″,”issue”:”4″,”issued”:{“date-parts”:”2015″},”page”:”1-24″,”title”:”Bank Profitability and Liquidity Management: a Case Study of Selected Nigerian Deposit Money Banks”,”type”:”article-journal”,”volume”:”III”},”uris”:”http://www.mendeley.com/documents/?uuid=859e3e8b-51a6-4b70-b98b-a4d17a5bdf5e”},”mendeley”:{“formattedCitation”:”(Bassey & Moses, 2015)”,”plainTextFormattedCitation”:”(Bassey & Moses, 2015)”,”previouslyFormattedCitation”:”(Bassey & Moses, 2015)”},”properties”:{“noteIndex”:0},”schema”:”https://github.com/citation-style-language/schema/raw/master/csl-citation.json”}(Bassey & Moses, 2015)
Posits that banking liquidity management merely means having the power to satisfy every cash commitment as quickly due, whether or not or not it’s receding from an accounting or interbank deposit or a maturing issue of the economic paper. Bank liquidity refers to the facility of a bank or banks to spice up a sure amount of funds at a certain price within a certain quantity of some time to discharge obligations as they fall due (Andabai ,Bingilar, 2015)
Profitability and liquidity as performance indicators square measure important to the most stakeholders: stockholders, creditors, and tax authorities. The shareholders have AN interest in the profitability of banks as a result of it determines their returns on investment. Depositor’s square measure involved the liquidity position of their banks as a result of it determines the ability to retort to their withdrawal desires, that square measure typically on demand or on a quick notice as a result of the case may even be. The tax authorities have AN interest inside the profit of the banks thus on total the appropriate tax obligation.ADDIN CSL_CITATION {“citationItems”:{“id”:”ITEM-1″,”itemData”:{“abstract”:”The issue of liquidity-profitability trade off is well documented in the literature. This study was carried out to examine the liquidity-profitability trade off of deposit money banks in Nigeria. The study was carried on fifteen deposit money banks in Nigeria and covered a panel data of 2010 to 2012. Two models were specified and estimated using Ordinary Least Squares (OLS) technique. The empirical results revealed that there is a statistically significant relationship between bank liquidity measures-current ratio, liquid ratio, cash ratio, loans to deposit ratio, loans to asset ratio-and return on equity. However, when return on asset was used as proxy for profitability, the relationship became statistically insignificant. It was suggested that the banks should evaluate and redesign their liquidity management strategy so that it will not only optimize returns to shareholders equity but also optimize the use of the assets.”,”author”:{“dropping-particle”:””,”family”:”Bassey”,”given”:”Godwin E”,”non-dropping-particle”:””,”parse-names”:false,”suffix”:””},{“dropping-particle”:””,”family”:”Moses”,”given”:”Comfort Effiong”,”non-dropping-particle”:””,”parse-names”:false,”suffix”:””},”container-title”:”International Journal of Economics, Commerce and Management United Kingdom”,”id”:”ITEM-1″,”issue”:”4″,”issued”:{“date-parts”:”2015″},”page”:”1-24″,”title”:”Bank Profitability and Liquidity Management: a Case Study of Selected Nigerian Deposit Money Banks”,”type”:”article-journal”,”volume”:”III”},”uris”:”http://www.mendeley.com/documents/?uuid=859e3e8b-51a6-4b70-b98b-a4d17a5bdf5e”},”mendeley”:{“formattedCitation”:”(Bassey & Moses, 2015)”,”plainTextFormattedCitation”:”(Bassey & Moses, 2015)”,”previouslyFormattedCitation”:”(Bassey & Moses, 2015)”},”properties”:{“noteIndex”:0},”schema”:”https://github.com/citation-style-language/schema/raw/master/csl-citation.json”}(Bassey & Moses, 2015)
1.2 Research problem
Commercial banks unit financially operative supported liquidity. The liquidity half desires observation to appreciate protection for depositors and profitability to the bank, therefore, can that profitability and liquidity two powers unit walking in opposite directions. The associate excessive quantity of attention to profitability may lead the bank into a pitfall by reducing the liquidity position of the banks. On the alternative hand, loads of associate excessive quantity of attention on liquidity would tend to possess an impact on the profitability if they are keeping abundant of cash reserves larger than that amount required by the conditions. Consequently, the bank will miss opportunities of disposition and investment that’s generating profitability
The impact of Liquidity on the profitability is to rationalize the assets or investments of the banks or establishment|financialbanks|financialorganisation|institution|establishmentestablishmentfinancial banks |institution establishment money industrial institution in such the approach that the firm or institution is additionally able to pay the short obligations due upon it with none serious loss. The arrangement of investments may result in reap profitability and in no half will be got to face any style of the slump. The foremost objective of this study is to hunt out the impact of liquidity on profitability
1.3 Research Question
What is the effect of the liquidity on the profitability of the commercial banks in Egypt?
1.4 Research Objectives
This research tries to achieve the following objectives:
The main objective of this research is to find out the impact of liquidity on profitability. This research will attempt to identify the main impacts of liquidity on profitability in the commercial banks, to identify the relationship between the liquidity and profitability, to determine the relationship between cash ratio and return on assets, to explore the relationship between current ratio return on assets
1.5 Importance of the Research
The importance of this research can be derived from its focus on the commercial banks that are gradually becoming vital in the contemporary into the liquidity and profitability. Also, the research focuses on the most active commercial banks, making it even more essential.
Another reason for the importance of this research is integrating both financial ratio analysis and critical examination of liquidity and profitability. Both indicators will be used to analyze how successful commercial banks have been in managing its liquidity level and translating it into high profitability.
1.6 Research plan
The Research includes.
Chapter 1. Introduction
Chapter 2. Literature review
Chapter 3. Methodology
Chapter 4. Data Analysis / Result / conclusions / /limitations, Recommendations
Chapter 2
Literature review
2.1 Preface
This chapter introduces a discussion regarding the study variables wherever the variable is that the liquidity that provides accounting information in some details and transparency while not deception or information is that the major target the depositors, it conjointly presents the classifications and therefore the factors that influence the liquidity level within the liquidity into the profitability. Moving afterward to the theories of liquidity that are business loan theory, Anticipated financial gain theory, three. monetary intercession Theory, Shift ability Theory, Liability/Liquidity Management Theory, light the variable that is that the profitability and in conclusion, ending with the connection between liquidity and therefore the profitability
2.2 The profitability
Profitability thinks about coming up with for corporate profit united of the foremost difficult and in-depth facet performed by bank profitability simply because of the involvement of diverse variables within the method process, that are usually not within the management of the bank. They additionally argued that profit coming up with maybe even a lot of advanced if it’s exhausted extremely difficult economic surroundings (Maqsood, Anwar, Raza, Ijaz, & Shouqat, 2016)
Profitability is that the difference between expenses and revenue over an amount of your time, usually one year. As explained by Heibati, Nourani, and Dadkhah, a business is organic; it survives and grows. Therefore, it is necessary that a bank earns profitability for its long-run survival and growth. It’s in addition necessary that enough profit ought to be attained to stay up the activities of the business to be able to acquire funds for the growth of the bank. (Bassey ; Moses, 2015)
Profitability is the important purpose of every business. Without profitability, it is not easy to run your business as per continued business and the extension of business is not easy. To create profit for short-term business it is necessary to create funds to fulfill its daily needs in operations and other wants business will generate more and more profits when this short-term need of funds will be generated by the business process, not by the external debt. (Maqsood, Anwar, Raza, Ijaz, ; Shouqat, 2016)
Profitability Ratios a class of financial metrics that are used to assess a business’s ability to generate earnings as compared to its expenses and different relevant costs incurred throughout a selected period. For many of those ratios, having the next price relative to a competitor’s quantitative relation or a similar relation from a previous amount is indicative that the bank is doing well (Khan ; Ali, 2016)
Profitability is that the difference between expenses and revenue over an amount of your time, usually one year. As explained by Heibati, Nourani, and Dadkhah, a business is organic; it survives and grows. Therefore, it is necessary that a bank earns profitability for its long-run survival and growth. It’s in addition necessary that enough profit ought to be attained to stay up the activities of the business to be able to acquire funds for the growth of the bank. (Bassey & Moses, 2015)
It has been represented that profitableness is measured by two substitute measures. First is that the come on the plus (ROA) as measured by the quantitative relation of profits to total assets, and also the second is come on equity (ROE). It’s usually believed that come on assets ROA reveals the capability of the assets of the banks to supply profit, although this estimate is biased because of off-balance-sheet activities. In keeping with profitableness can even be measured victimization come on investment (ROI) (Maqsood, Anwar, Raza, Ijaz, ; Shouqat, 2016)
2.3 THEORIES of the liquidity
2.3.1 Commercial loan theory
The commercial load which being granted for brief periods and to finance the assets, wherever borrowers refund the borrowed funds once completion of their trade cycles with success. in step with this theory, the banks don’t lend cash for the needs of buying realty or commodity or for finance in stocks and bonds, the length of the expected payback amount of those investments, whereas this theory is planned for traders World Organization have to be compelled to finance their specific commerce transactions and for brief periods and bigger capital buffers area unit less at risk of failure throughout money crisis and this created it imperative for the restrictive authorities to compel larger economic condition and liquidity on individual banks than creating it ex gratia. This theory is adopted as a result of it captures the money performance of banks and also the LCR variable, that measures the short-term liquidity positions of banks within the model adopted by this study. (Akinwumi, Micheal, & Raymond, 2017)
The essence of the idea is that short-term loans area unit most well-liked by commercial banks as they’ll be repaid from the return of transactions they facilitate and finance. A proposition that has been vastly subjected to criticism. Its antagonists argue that the idea may be a deterrent to economic development particularly for developing countries like the Federal Republic of Nigeria that need vast long run funds to supply an enormous push for development. (Tamunosiki, Baribefe, ; Blessing, 2017)
2.3.2 Anticipated income theory
This theory holds that a bank’s liquidity will be managed through the correct phrasing and structuring of the loan commitments created by a bank to the purchasers. Here the liquidity will be planned if the regular loan payments by a client are supported the long run of the recipient. In step with the speculation emphasizes the earning potential and also the credit goodness of a recipient because of the final guarantee for making certain adequate liquidity. Posits that the speculation points to the movement towards self-liquidating commitments by banks. This theory has inspired several industrial banks to adopt a ladder effect in the investment portfolio (Akinwumi et al., 2017)
Banks will subsume liquidity downside by giving advances through acceptable techniques and so assembling these advances in time after they become due likewise as decrease the compensation postponement at the due time. Reported if the person’s prospect revenue of a corporation increase than creditor pays back the credit installment in given amount of your time and with the assistance of this refund the required liquidity state of the bank is upheld. The anticipated theory of liquidity significantly focuses on long-run advances. The long terms advances that measure prudent for the banks likewise as person ability and power to pay back advances in a very given amount (Bagh, 2017)
This theory holds that banks’ management of liquidity may be increased by adequate phasing and structuring of the loan commitments to the purchasers. The speculation focuses on the earning capability and borrowers’ credit goodness because of the final guarantee for liquidity adequacy. It drives banks’ transactions in self-liquidating commitments and encourages the adoption of ladder effects in the investment portfolio of economic banks (Tamunosiki et al., 2017)
? 2.3.3 Financial Intermediation Theory
Financial intervention is largely a dialogue service performed by banks by linking economic agents with surplus funds and economic units with deficit funds. This is often essential in capital formation for real investment, reduction of informational asymmetries. The intervention provides banks with the capability to mobilize deposit and supply credit (Bagh, 2017)
2.3.4 Shift ability Theory
The shift ability theory is premised on the argument that banks’ liquidity may be a operate of their capability to amass assets that are convertible or marketable to alternative lenders or investors ought to there be close would like for money. Noting that the banks’ assets ought to be marketable to the financial organization and alternative monetary establishments at discounted values. Therefore this theory acknowledges marketability or interchangeableness of a bank’s assets may be a basis for making certain liquidity in accordance to the shift ability theory may be a method by that bank interchange or exchange its assets for the acute liquid bank once there’s scarceness of liquidity. Additionally, to the current, liquidity of a bank might be bigger if it clings to assets so as to sell and provide the commercial bank further because the markdown in marketplace equipped to get the assets. Moreover, for governing and dominant liquidity interchangeableness or shift ability of banks assets it’s central. The luxuriant supply of the liquidity the acute sensible securities clutch’s by the bank. In line with the financial profit of a bank is Kwon to profitability and with a read to measure profitableness they used two impotent proxies i.e. ROE and ROA. (Bagh, 2017), (Tamunosiki et al., 2017)
2.3.5 Liability/Liquidity Management Theory
Liquidity management theory consistent with could be a strategic set up on the acquisition funds from depositors and different creditors, and therefore the determination of an applicable (term based) mixture of such funds for a selected bank. It focuses on the liability aspect of bank record on the bottom that supplementary liquidity may be derived from the liabilities of a bank. Supports this position by the difference that given banks’ capability to get all requisite funds, it’s inappropriate to own liquidity on the plus aspect (liquid asset) of the statement of economic position. (Tamunosiki et al., 2017)
2.3.6 Liquidity Preference Theory
Highlights economist description of liquidity preference theory as the dealing of current business and its use as a store of wealth. Posits that liquidity preference is necessitated by the requirement finance expenditure, speculation on the rate of interest path, or thanks to uncertainty concerning the longer term. These motives became called transactions-, speculative and preventative motives to demand cash (Tamunosiki et al., 2017)
. 2.4 The Determinants of bank profitability
The determinants of banks profitability and liquidity. Specifically, however, bank-specific have an effect on bank profitability?.
Bank-specific factors have known many banks specific determinants of bank profitability as well as size, capital strength, CR, value management, liquidity, and bank’s market power leading banks turning into additional profitable as they become larger. However, some have instructed that as banks expand in size through entry into new markets or the building of latest branches, they incur extra operative prices, that erode profits declared that “there is a few proofs of a major size-profitability relationship in a number of the estimators, however overall the proof for any systematic relationship between size and performance is unconvincing (Adelopo, Lloydking, & Tauringana, 2018)
Which square measure probably to be accentuated throughout crisis thanks to an absence of market confidence? Consequently, the initial value of development, diversification, and branch growth could also be preventive. Higher market imperfectness and uncertainty caused by the crisis may additionally have an effect on value recovery. Thus, the expected economies of scale might not pass, leading to a negative relationship between banks size and profit (Adelopo et al., 2018)
2.4.1 Capital strength.
The capital strength of a bank indicates its capability to satisfy deposit demand and sends signals to bank customers concerning its stability and skill to shield their savings particularly in periods of uncertainty love the monetary crisis. Several existing studies as well as report positive relationships between capital strength and banks profitableness. A plausible clarification for these findings can be that well-capitalized (Al-Harbi, 2017)
Banks square measure during a higher position to use market opportunities and revel in additional deposit with the potential for enlarged interest financial gain and improved earnings diversification. They’ll conjointly raise cheaper capital because of their size, Capital. There square measure 2 theories that frame the relation between capital and liquidity creation. The primary hypothesis “risk absorption” predicts that bigger capital enhances banks’ ability to make liquidity which can cut back banks’ liquidity. Supports this. The second hypothesis “financial fragility/crowding-out states that higher capital impedes liquidity creation resulting in higher liquidity. Highlighted that capital contains a negative impact on liquidity (Al-Harbi, 2017) (Adelopo et al., 2018)
2.4.2 CR
Banks encounter CRs in two main ways: after they expertise vital default rates on loans (bad debts) and after they are unable to fulfill the money demand of depositors thanks to inadequate reserves or inability to lift short funding economic condition Previous studies report mixed findings on the and bank profit. Studies coverage positive relationship argues that it reflects the straightforward logic of upper risk-higher come. Thus, banks alter their charges to mirror the calculated risk they’re exposed to. Consequently, they demand higher collaterals and charge higher interest rates for speculative transactions, and in context with high data imbalance. (Adelopo et al., 2018)
. 2.4.3 Market power.
Literature reports mixed findings within the relationship between markets power and bank profitability. Argued that prime market concentration ought to enable banks with higher market power to safeguard their earning even throughout unfavorable economic conditions and presumably throughout the monetary crisis since they will management there in operation prices while having the ability to work out their revenue. But noted that AN inverse relationship is additionally potential if banks with high market power quickly deliberately cut back their value to evict different competitors or if they use interest profitability as a leader. This study anticipates a positive relationship between market power and bank profit before, during, and once the crisis as a result of market power might enable a bank larger potency and better revenue particularly in an exceedingly noncompetitive market and through the amount of uncertainty because of their resource advantage .(Al-Harbi, 2017))
2.4.4 Cost.
Studies have systematically reportable important negative relationship between bank profitability and operation prices supported the argument that value erodes profit and is negatively concerning performance. Banks with high value to profitability relation area unit probably to report low profitability, and signal management unskillfulness with adverse consequences for profitability. This result could become exacerbated throughout the money crisis due to the uncertainty that might have an effect on operating expense, in context with high info spatiality consequently, on paper, this study expects a negative relationship between value and bank profitableness before, during, and once the crisis (Adelopo et al., 2018)
2.5 Macroeconomic factors
Unlike the internal factors, economics variables square measure the factors that don’t seem to be among the control of the banks’ management. One in all the overtimes used variables as a life of market potential is that the rate of gross domestic product GDP found that gross domestic product growth plays a well positive role in crucial banks’ monetary performance. Demand for banking services is high throughout the time of upward sentiments, thereby increasing the mixture demand. Jiang et found a positive relationship between real gross domestic product growth and the bank’s profitableness supported a sample of banks from Hong Kong. Throughout the economic holdup amount, unsure world economic conditions were mirrored in lower investments and export growth that may have seriously hampered the recovery method. Therefore, higher growth rates of the real gross domestic product would lead to a lot of loans and thereby higher profitability, whereas the converse would result in lower growth (Al-Harbi, 2017)
2.5.1 Growth in GDP.
There’s associate degree expectation of a positive relationship between bank profitability and also the growth in GDP. This expectation is plausible throughout an amount of relative economic stability and growth. this can be as a result of a rise in productivity level during a country, all things being equal, ought to cause the increase in income and make the contributory atmosphere for private and company investment resulting in the increase in bank profitableness because of increase in loan and credit. Previous studies that report the positive relationship between growth in GDP and bank profitability (Adelopo et al., 2018)
2.5.2 Inflation
Indicates the economics condition of Associate in an economy and banks in operation in countries with high inflation exhibit terribly high margins and price Banking activities tend to be high leading to higher gain throughout times once economics conditions square measure favorably. all over that inflation encompasses a negative impact on the bank’s gain supported empirical proof from the Philippines from 1990 to 2005. However, Buckley argued that information superhighway result of inflation on bank’ profitability looks to be a lot of difficult and ambiguous. (Salike ; Ao, 2018)
2.5.3 Monetary policy.
Variety of single-country studies showed that tightened financial policies, charge per unit, have a negative impact on that investigates the determinants of business banks’ liquidity risk when the country adopted the utilization of multiple currencies charge per unit system created a similar conclusion, however the author used the reserve demand relation as a proxy for the financial policy (Al-Harbi, 2017)
2.5.4 Interest spread
The distinction between the disposition rate of interest and also the deposit rate of interest is that the nominal interest profitability that’s generated by banks when paying depositors. Banks in countries with higher interest spreads tend to face lower default risks. this can be as a result of once interest unfold widens, banks, because the suppliers of funds, hold assets that currently have additional buying power. Haron (2004) found that the profitability of banks is influenced absolutely by interest rates. Found that higher real interest rates are related to higher interest margins and profit particularly in developing countries. This could be as a result of in developing countries; demand deposits often pay lower market interest rates (Salike ; Ao, 2018)
2.5 Deposit insurance
In line with the theory, whereas deposit insurance could increase banks’ stability by reducing banks’ failure, it’s going to decrease the bank’s stability by encouraging risk-taking on the part of banks. Thus, the impact of deposit insurance on banks’ liquidity is ambiguous. The study conducted by Davis and Obasi (2009) indicated that there is not any link between banks’ liquidity and deposit insurance. On the contrary, the studies conducted on the U.S.A. banking industry show that deposit insurance lower banks liquidity (Al-Harbi, 2017)
2.6 The Liquidity
Liquidity refers to the liability of a bank to verify the provision of funds to meet monetary commitments or maturing obligations at an inexpensive worth in any respect times. However otherwise, bank liquidity means banks having money once they’d find it irresistible considerably to satisfy the withdrawal wants of their customers. The survival of deposit money banks depends greatly on but liquid there since liquidity being a proof of at hand distress, can merely erode the boldness of the overall public among the banking system and results to run on deposit (Bassey & Moses, 2015)
Liquidity plays important role in determinant the effectiveness of banks. So it’s a necessity for business banks to require care of a balanced liquidity relation therefore to fulfill their short-term liabilities. Thanks to its relationship with the day to day operations it’s imperative for every internal and external analyst to examine liquidity. The aim of liquidity assets is maintaining the trade-off between liquidity and profitability (Khan & Ali, 2016)
?.
Liquidity refers to the ability to buying and marketing of assets like stocks and bonds square measure liquidity these square measure assets sold-out at this value of market and convert it into cash on the opposite hand liquidity is applied among large the huge banks or massive financial institutions like banks which they meet cash of obligation able to avoid wasting lots of from loss. (Maqsood, Anwar, Raza, Ijaz, & Shauqat, 2016)
Liquid assets got to be marketable or transferable. This means, they are expected to be born-again to money merely and promptly, and square measure redeemable before maturity. Another quality of assets is value stability. Supported this characteristic, bank deposits and short-term securities square measure further liquid than equity investments thanks to the particular incontrovertible fact that the prices of the previous square measure fastened than the costs and worth of the later (Bassey & Moses, 2015)
?.
Liquidity management explains the struggle of managers or investors to decrease the liquidity risk. Explained that problems issues arises once banks do not fulfill their demands specially those issues which might manufacture problems between purchasers and banks trust thus every depository financial establishment concern banking company full-service bank facility financial institution bank is creating a shot to increase its profits at an analogous time to satisfy their financial requirements by its depositors of comfy amount as liquidity (Maqsood, Anwar, Raza, Ijaz, & Shauqat, 2016)
2.7 The Relationship between liquidity and profitability
The relationship between liquidity and profitability is sophisticated additionally as a result of liquidity doesn’t have a standardized nature. Liquidity is also delineating by several ratios, known as dynamic or static. Thus, liquidity is also represented as the economic condition so ratios supported the connection between current assets and liabilities ought to be taken into consideration. The second approach to liquidity is said to the structure of assets as a result of a lot of theirs of quick assets, i.e. money and its substitutes, the lower the chance of financial condition, and it’s then aforesaid that the enterprise is a lot of liquid. On the opposite hand, liquidity is also outlined because the speed of the flow of cash, because it has been represented by I. A. Richards and Laughlin (1980) World Health Organization, planned the money conversion cycle because the dynamic liquidity lives. Free income from in operation activity has been urged by music director (1985) because the best live of liquidity within the context of money generation The transformation of economies into market-oriented ones ought to be noted, that has a direct impact on the management of enterprises. Exchanges develop and consolidate, the activity the perform of centers to extend capital, as well as that of pension funds. That’s why the speeds of coming back to be taken into consideration area unit those needed by investors (Wolski ; Bolek, 2016)
In recent years, the impact of liquidity on the profitableness is the most disputed topic within the banking sector significantly and alternative sectors normally. There is a unit of many studies applied by totally different authors to look at that influence. Acter and Mahmud (2014) show that the 2 terribly crucial problems in organization management which could invariably judge the money health of the corporate area unit liquidity and profitability. Both liquidity and profitableness may be necessary selections for any money establishments. As an example, Jeevarajasingam (2014) states that the shareholder’s come back, risk and client satisfaction will be influenced by each liquidity and profitability selections that area unit important social control call. Every bank makes an attempt to draw in additional customers so as to get additional profits and be the additional profitable bank. What is more, Kaur and Skilky (2013) demonstrate that a corporation’s overall potency and performance will be showed by the profitableness ratios whereas a bank conjointly desires liquidity so as to continue their business? Not solely profitability is very important for money establishments, however conjointly liquidity may be crucial moreover in creating money selections (Ibrahim, 2017)
That takes place in the case of ancient profitability measures, may represent miscalculation resulting in incorrect conclusions. The relationship between liquidity and profitability presented extensively within the literature has however not yet brought an unequivocal answer to the question answer to the question what this relationship is, despite the actual fact that there’s an elementary theory speech that along with the expansion of liquidity, profitability decreases. the ancient liquidity ratios square measure of static nature, that’s why their interpretation doesn’t permit Associate in-depth analysis of the essence of the matter that happens once the results of studies conducted square measure in distinction with the idea. Changes in business models of enterprises that square measure happening nowadays additionally reveal faults in ancient profitableness ratios. As an instance, within the case of chartered buildings or machinery ROA (Return on Assets) becomes not absolutely reliable because of the numerous impairment of assets. The weakness of ROE (Return on Equity), however, is that the enterprise should repay principal installments of liabilities shrunken from the profitability that is within the dividend of that magnitude relation, as a result of that the come back on equity isn’t connected simply with equity (Wolski ; Bolek, 2016)
CHAPTER THREERESEARCH METHODOLOGY3.1 PrefaceThis chapter focuses on the methodology and the design of this study. It presents the research design, research model, research variables and measurements, it also describes the sample size, data collection methods
3.2 Research Design There square measure their varieties of analysis design; qualitative, quantitative, and mixed style. In qualitative analysis style, the study is predicated on gathering qualitative knowledge that’s neither measurable nor quantitative, whereas quantitative study is predicated on quantitative, measurable and numerical knowledge. Every style has its own edges and limitations. This study applied a quantitative analysis style as a result of the look involves an assortment of information so as to answer queries regarding the present standing of the topics within the study..3.3 Research ModelThe research Framework is based according to the Prior studies and to the aim of this study
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Modified frame work
3.4 Research Variables and Measurements3.4.1 Independent Variable
The independent variables of this study are the liquidity will be measured through financial measurements of liquidity: Brief discussion and analysis of a company’s financial position, Return on equity, return on the assets return on investment, Return on assets.
3.4.2 Dependent Variable
The dependent variable in this study is the profitability of the commercial banks we can measure the profitability by calculating the current ratio, liquid ratio.
3.5 Sample Size
The sample size of the study comprised of four commercial banks in the Egypt which are recorded in the Egyptian stock market.
3.6 Data CollectionThere are unit two styles types of information in analysis studies: Primary information and secondary information. Primary information is that the first-hand information collected by the study by recruiting participants whereas secondary information relies on results, annual Reports and findings of researches?.
This study relies on secondary information assortment since they supply an additional realistic conclusion to satisfy the objectives of the study. The info can chiefly be collected from revealed annual reports and money statements of four commercial banks within Egypt listed within the EGX covering the amount from 2016 to 2017..3.6.1 Banks Profiles 3.6.1.1 Commercial international bank (CIB)
Commercial International Bank – Egypt (known as: CIB) may be a public company, listed on Egyptian Exchange (EGX) since Feb 1995. CIB operates at intervals the Banks sector specializing in distributed Banks. Its twenty four subsidiaries in operation across Egypt and auk. CIB is predicated in urban center, Egypt and was established in Gregorian calendar month 1975.
3.6.1.2 Arab banking corporation BANK (ABC)
Bank ABC in Egypt features a network of twenty-eight branches unfolds across EGYPT centers. The branch network is supported by intensive coverage of ATMs phone, net, and SMS banking services, the bank provides premier money services to company banking and institutional shoppers, particularly within the areas of project finance and syndications, heterogeneous trade finance solutions and treasury merchandise. Egypt (known as ABC) may be a public company, listed on Egyptian Exchange (EGX)
3.6.1.3 Egyptian Gulf Bank (EGBE)
Egyptian Gulf Bank may be a public company, listed on Egyptian Exchange (EGX) since November 1983. It operates at intervals the Banks sector specializing in Regional Banks. it’s fifteen subsidiaries operative across Egypt and European nation. Egyptian Gulf Bank relies on the metropolis, Egypt and was established in October 1981
3.6.1.4 BARCLAYS BANK (PLC)
PLC BANK which Provides business banking services together with deposits, loans, and credit cards; investment banking services together with finance and investment informative on mergers and acquisitions, initial public giving and underwriting; plus management services together with wealth management
3.7. Summary and ConclusionThis chapter delineates the methodology utilized during this analysis; the variable was liquidity and conjointly the dependent, the unit the profitability. data analysis techniques were done by analyzing the financial statements by analysis of the annual reports from the banks collected from four banks at intervals Egypt to look at but the liquidity have an impact on the profitability
CHAPTER FOURDATA ANALYSIS, DISCUSSION OF FINDINGS& CONCLUSION
4.1 Preface.
This chapter deals with the presentation of the results with reference to the study variables. It analyzes the overall descriptive characteristics of the sample studied and conjointly answers the analysis question. In alternative words, it deals with the impact of the liquidity toward of the profitability into the business banks within the Egypt Analyze of the info within the budget of four commercial banks within Egypt in two years ranging from 2016 to 2017. This chapter is split into half’s: 1st part displayed the info analysis of the sample, second half it gift the mentioned finding, third half it gift the conclusion of the study, the limitation and at last the recommendations for the long run analysis.
4.2 Data AnalysisData analysis techniques and methods and measure to analyze knowledge collected through knowledge assortment instruments and to derive purposeful results for the analysis. These results square measure then to draw conclusions for the analysis and to answer the analysis question(s). So knowledge analysis techniques square measure a very important a part of the research
4.2.1 The Ratios of the three banks
3356610175259CIB
2016 2017 LIQUDITY
RATIOS
1.08 1.10 Current ratio
0.043 0.055 Liquid ratio
0CIB
2016 2017 LIQUDITY
RATIOS
1.08 1.10 Current ratio
0.043 0.055 Liquid ratio
-15811589535CIB
2016 2017 PROFTABILITY
RATIOS
0.030 0.035 ROA
0.52 0.49 ROE
12.51 14.71 ROI
0CIB
2016 2017 PROFTABILITY
RATIOS
0.030 0.035 ROA
0.52 0.49 ROE
12.51 14.71 ROI
3213735350519Barcaluse bank
2016 2017 liquidity
RATIOS
9.05 1.06 Current ratio
1.23 0.21 Liquid ratio
00Barcaluse bank
2016 2017 liquidity
RATIOS
9.05 1.06 Current ratio
1.23 0.21 Liquid ratio
-571546355Baracalues bank
2016 2017 PROFTABILITY
RATIOS
0.034 0.027 ROA
0.059 0.047 ROE
0.066 0.052 ROI
0Baracalues bank
2016 2017 PROFTABILITY
RATIOS
0.034 0.027 ROA
0.059 0.047 ROE
0.066 0.052 ROI
3289935202565EG BANK
2016 2017 LIQUDITY
RATIOS
1.05 1.06 Current ratio
0.077 0.13 Liquid ratio
00EG BANK
2016 2017 LIQUDITY
RATIOS
1.05 1.06 Current ratio
0.077 0.13 Liquid ratio
-100965288290EG BANK
2016 2017 PROFTABILITY
RATIOS
0.014 0.015 ROA
2.87 0.025 ROE
2.43 2.17 ROI
00EG BANK
2016 2017 PROFTABILITY
RATIOS
0.014 0.015 ROA
2.87 0.025 ROE
2.43 2.17 ROI
3270885-228600ABC BANK
2016 2017 LIQUIDTY
RATIOS
1.16 1.17 Current ratio
3.51 3.00 Liquid ratio
0ABC BANK
2016 2017 LIQUIDTY
RATIOS
1.16 1.17 Current ratio
3.51 3.00 Liquid ratio
-215265-314325ABC BANK
2016 2017 PROFTABILITY
RATIOS
0.011 0.010 ROA
0.079 0.070 ROE
0.46 0.50 ROI
0ABC BANK
2016 2017 PROFTABILITY
RATIOS
0.011 0.010 ROA
0.079 0.070 ROE
0.46 0.50 ROI
-434340-4381500
lefttop
152400476250
4.2.2 Analysis of the liquidity ratios into the commercial banks
Analysis of the reports from the year 2015 to 2017 shown that which the CIB bank that have into the between the period of 2016 to 2017 which be the liquid have been be increased into the measurements by specific period into the current ratio from 1.08 to be 1.10 and be increased from the liquidity ratio from the 0.043 to be 0.055 that have been to increase from the liquid of the cash and assets into the bank lead to increase of the liquidity into the measurements in the Barclays bank which be into the current ratio which have been to decreasing into the current ratio from start in 2016 by 9.05 to decrease to 1.06 and have decreasing into the liquidity into the bank which have from start 2016 by 1.23 to decreasing to in 2017 0.21 which lead to result have deficits into the liquidity into 2017 in the bank . in the EG banks which be obtain of the current ratio that to increasing of the current of the cash from 2016 by 1.05 to increase in 2017 by 1.06 lead have a result of increasing of the liquidity into the bank. In the ABC bank which into the current ratio which has been increasing from 2016 by 1.16 to increase in 2017 by 1.17 and another have to decrease in the liquid when in 2016 by 3.51 to decrease by 3.00 which lead decreasing in some of the liquidity into the bank
4.2.3 Ratios to measure of the liquidity
1. Current ratio = current assets/ current liabilities
2. Liquid ratio = cash+ investments / current liabilities
4.2.4 Analysis of the profitability into the commercial banks
Analysis of the reports from the year 2016 to 2017 shown that The highest rate into some of the banks which into the CIB that have a big rat into increasing the rate of the profitability into the ROA which from start into 2016 by 0.030 to increasing to 2017 by 0.0.35 and have increasing into ROI which be increasing from start 2016 by 12.51 to 2017 by 14.71 which that have result from increasing the rate of the liquidity into effecting the rate of the profitability and in the BARCALUES bank which have a some deficits into the profitability because decreasing the rate of the rate of the liquidity which have decrease into start from 2016 into ROA by 0.34 to 0.027 into 2017 and decreasing into ROI which have to decrease from start 2016 by 0.066 to 0.052 into 2017 which have the result that have a big deficits and effect the decreasing the rate of the liquid and be against the rate of the profitability in the EG BANK which have increasing of the rate the profitability from in ROI have be start in 2016
by 0.014 to increasing by 0.015 in 2017 and in have ROI which be to decrease a some of minimal that have decrease in the start of 2016 2.43 to decrease by 2.17 in 2017 which have result of be a some of increasing rate of the profitability but rate not be highest the CIB bank , in the ABC BANK which in ROI that have be some o minimal deficits into the profitability which in start from 2016 that have 0.011 to decrease in 2017 by 0.010 in another measure which in ROI have a decrease in start from the 2016 0.46 lead to decrease by 0.50 in 2017 which have a some of the deficits and minimal decrease of the profitability because the rate of the liquidity be effect toward the measurements of the profitability lead have a some of the decreasing into rate of the profitability
4.2.5 Ratios to measure profitability
1. Return on assets (ROA) = net income/ total assets
2. Return on equity (ROE) = net income/ total equity
3 .Return on investments (ROI) = Net profit before tax / investments
4.3 Research Findings and Discussion The empirical results of the analysis unit of measurement quite fascinating for one outstanding reason; whereas the affiliation between return on equity and also the freelance variables is statistically vital, that between return on assets and freelance variables are statistically insignificant. The results show that the liquidity of business banks have a significant impact on the profitability of returns to shareholders but incorporates a weak impact on the gain of returns to and. These results counsel that despite the massive profit declared by Egyptian banks annually; their liquidity does not optimize the use of assets?.
The analysis discovered that the very best level of the money performance was within the banks that have the amount of the money gain as we discover in CIB AND EG BANK that has the very best level of the money performance within the four of the commercial banks within Egypt. Within the different hand, the lowest level of the money performance was in barcalaes bank and basics BANK into the profitability of the four industrial banks within Egypt. From this analysis can we are able to} say that the additional level of the profitability within the plan within the commercials banks within the Egypt additional edges will profitability on the money performance because the level of performance affected absolutely by the amount of the liquidity within the plan. The results of this study were relevant with the previous studies, for example, there’s a positive relationship between the liquidity toward impact into the profitability, this is as a result have to try to destncvive structure to possess been impact toward into the bank’s performance can increase. The theoretical perspective of banks theory managers World Health Organization have higher access to a banks non-public info will build credible and reliable communication to the social to optimize the huge price of the Banks and conjointly scale back rate of the danger of the reducing the speed of the profitability into the banks
4.4 ConclusionThis analysis has investigated the impact of liquidity on the profitability of four Egypt banks over the quantity 2016 to 2017. Plenty of apparently, it’s Associate in commercial banks undeniable fact that liquidity and profitability unit of measurement necessary factors for any with success banks in Egypt. However, little is assumed regarding the Egypt banking. a remarkable and valuable result of this analysis was that liquidity ratios have a positive impact on profitability inside the target banks in Egypt. This study had the type of limitations. Presently their unit of measurement quite banks in Egypt (Ibrahim,2017), bank management entails delicate reconciliation of the liquidity and profitableness trade-off. This can be as a result of excessive liquidity reduces profitableness whereas excessive liquidity risks exposure, in pursuit of most profitableness may lead to the economic condition of a bank. This study was administered to through empirical observation to examine the link between liquidity and profitability of fifteen Egyptian banks. The empirical results indicated that there are applied mathematics vital relationship between profitability and liquidity once come back on equity is employed as a live of profitableness, however, the link becomes insignificant if profitableness is proxies by coming back on plus. Thus, the liquidity of Egyptian banks maximizes returns to shareholders, however, is manufacturing under optimum profitableness in terms of economical utilization of assets. ADDIN CSL_CITATION {“citationItems”:{“id”:”ITEM-1″,”itemData”:{“abstract”:”The issue of liquidity-profitability trade off is well documented in the literature. This study was carried out to examine the liquidity-profitability trade off of deposit money banks in Nigeria. The study was carried on fifteen deposit money banks in Nigeria and covered a panel data of 2010 to 2012. Two models were specified and estimated using Ordinary Least Squares (OLS) technique. The empirical results revealed that there is a statistically significant relationship between bank liquidity measures-current ratio, liquid ratio, cash ratio, loans to deposit ratio, loans to asset ratio-and return on equity. However, when return on asset was used as proxy for profitability, the relationship became statistically insignificant. It was suggested that the banks should evaluate and redesign their liquidity management strategy so that it will not only optimize returns to shareholders equity but also optimize the use of the assets.”,”author”:{“dropping-particle”:””,”family”:”Bassey”,”given”:”Godwin E”,”non-dropping-particle”:””,”parse-names”:false,”suffix”:””},{“dropping-particle”:””,”family”:”Moses”,”given”:”Comfort Effiong”,”non-dropping-particle”:””,”parse-names”:false,”suffix”:””},”container-title”:”International Journal of Economics, Commerce and Management United Kingdom”,”id”:”ITEM-1″,”issue”:”4″,”issued”:{“date-parts”:”2015″},”page”:”1-24″,”title”:”Bank Profitability and Liquidity Management: a Case Study of Selected Nigerian Deposit Money Banks”,”type”:”article-journal”,”volume”:”III”},”uris”:”http://www.mendeley.com/documents/?uuid=859e3e8b-51a6-4b70-b98b-a4d17a5bdf5e”},”mendeley”:{“formattedCitation”:”(Bassey & Moses, 2015)”,”plainTextFormattedCitation”:”(Bassey & Moses, 2015)”,”previouslyFormattedCitation”:”(Bassey & Moses, 2015)”},”properties”:{“noteIndex”:0},”schema”:”https://github.com/citation-style-language/schema/raw/master/csl-citation.json”}(Bassey & Moses, 2015)
4.5 limitations
One of the foremost limitations of this study is that this study has lined four banks as a result of annual reports of various banks are not out there in their sites and. Moreover, the data of those banks were out there just for nine years. Another limitation is that it’s still not clear which the EGYPT banks hide their annual reports considerably profitability statements and balance sheets from people. It needs to be noted that this study has lined banking on high of findings any increase among the cash ;amp; equivalents, loans and advances, and total deposit will increase net profitability for the banks. So as that Egypt banks need to like further safety and confidence thus on attract further purchasers or further depositors for profitability further profits and be safe at the constant time. It might be associate honest arrange for Egypt banks to remain a balance between liquidity and profitability to avoid any cash risks. Finally, further studies would be conducted in Egypt banks to analysis the impact of liquidity, during this analysis paper it’s examined that the impact of liquidity on profitability on the banking performance of banking sector of EGYPT and during this analysis paper knowledge is taken from eight four commercial banks within the Egypt, CIB bank, BARCALUES bank, EG bank, ABC bank, financial annual reports of two years from 2016 to 2017 square measure used as population and knowledge is measured of the variables liquidity and profit and also the quantitative relations square measure taken from liquidity money quantitative relation and current quantitative relation and from profitability quantitative relation is taken come on assets and that I liquidity money conversion cycle is left and fast ratio also left as a limitation and in profit come on equity, payout quantitative relation and profitability margin and come on investment conjointly leave as limitation during this analysis paper
4.6 RecommendationsMeasuring the analysis revealing by all the measurements things will increase the accuracy of the result. The long-run analysis got to enlarge the amount of sample, which might lead to higher findings. Future work can live identical variables on various banking like industrial, Telecommunications and Manufacturing; there might in all probability altogether take issuant completely totally different vary differ diverge show a discrepancy results since different industries respond otherwise to data disclosures. Managers in banks got to profitability not only for having cheaper but in addition as results of liquidity revealing of knowledge can increase transparency and responsibility in the annual news.
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