Drivers of Bank Performance in Emerging Markets Amid the Covid-19 Pandemic: A Case Study of Private Banks in Turkey

Abstract

Abstract— The study aims to determine and examine the impact of the drivers of bank performance in emerging markets amid the Covid 19-pandemic. Specifically, the study attaches the importance of aiming to assess how income diversity, loans to total assets, inflation, the exchange rate of the Turkish Lira against the US dollar and Covid-19 affected the performance of banks in emerging markets. Annual data from 2011 to 2021 collected from 7 private banks in Turkey were analysed using a fixed effects model subject to robustness tests that proved the model to be robust and reliable in addressing related contemporary research issues. The results showed that inflation, the Covid-19 pandemic together with the depreciation of the Turkish Lira against the US dollar adversely affected the banks’ performance measured using net interest margin. The study uncovered that income diversity and loans to total assets ratio contributed to improvements in the banks’ performance. The findings’ practical implications place a demand for inflationary targeting as has been previously advocated by related studies as well as placing huge importance on monetary and fiscal policies. Additionally, the findings enhance awareness among bank managers of the importance of diversifying and increasing their income sources amid the rise in challenges posed by the pandemic.  The significance and implications of this study were highly called for as the study’s policy implications are attached to financial sector stability, growth and development, and innovation as well as economic and social growth, and development.