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Title: Factors Effecting the Capability to Earn Profit Earning of Thai Commercial Banks
Authors: Bampennorakij, Wuttikorn 
Issue Date: 1994
Publisher: University of the Thai Chamber of Commerce
Source: Wuttikorn Bampennorakij (1994) Factors Effecting the Capability to Earn Profit Earning of Thai Commercial Banks.
Abstract: The study in factors effecting the capability to earn profit of Thai commercial banks the purpose is to study the importance of factors effecting profit earning of Thai commercial banks and showing the efficiency in administering the assets of the commercial banks, by dividing the study into 3 group, large, medium and small banks. This is because each group of bank has different asset and each bank has different standard or strategy, making the capability and efficiency of operation, including return from the investment to be different. The capability to earn profit by Thai commercial banks may be studied from the rate of return to the asset which cause income. From the 3 groups of commercial banks, it will be found that large commercial bank has higher return and at high rate, showing the capacity in administering the assets or the advantages from economy according to the size, while the medium size bank has rate of return to asset which create income lower than other groups of bank, because the administration of asset of the commercial bank in this group is faced with the problem making the profit to decrease. However, the group of small bank has rate of return which is very efficient. Thus, the capability to earn profit by the commercial bank in each will be different, depending upon the administration of the assets of the bank. In analysing the relationship between administration of assets and capability to earn profit of Thai commercial bank, the model used in the study is based upon the PROEA as instrument to measure the profit earning of the commercial banks or as deviation and the factors in earning profit by commercial banks are independent deviator, being BDLOAN, BOLOAN, EQLOAN, RATIOL, RATIOI, MKS, FBI, GFEI, OEI and SP, by multiple Regression Analysis and estimate by means of OLS, Multiple Linear Regress Formula, and use the data of 15 Thai commercial banks between 1984-1993 by dividing the banks into 3 groups. The result of the study found that Regressing Formula of large bank is reliable, due to the efficiency value of the independent deviators are many with level of importance in statistics. The medium banks, the Regression Formula calculated is of lower reliability and the independent deviator has less influence on the deviation. The small bank, however, the Regression Formula, is reliable and the independent deviators are influential to the deviation. The factor influencing and has direction according to the assumption to the capability in earning profit of the 3 group of the banks, are the ratio of expenses in administration to total income (OEI), showing the efficiency in administration of the large banks which has lowest ratio. The EQLOAN will have influence to the earning of profit in large commercial bank and small commercial bank, which the profit is high when there is higher capital and shareholders' equity. For the RATIOI, this will have influence to the capacity to earn profit only in the group of large bank, by having relationship opposite to capability to earn profit, that is to say investment in securities which are mainly Government Bond will give return lower than from investment in credit. This makes the profit of the bank to decrease. For the case of the bank to decrease. For the case of SP (difference between interests)it will effect the capability to earn profit of large commercial bank alone because large commercial bank has higher SP than other groups, causing the profit to increase. At the same time ratio of doubtful debt to credit, BDLOAN, as influence in making earning of profit by medium size and small size commercial banks, but there is direction that will make the capacity to earn profit higher, which may be due to volume of credit has increase but reserve for doubtful debt may not be established factually, making the bank to earn higher profit. Ratio if income from foreign exchange to total income (GFEI) will have the influence in the capacity to earn profit of small size commercial banks, which will cause increase profit. This is the same as the MKS (market share) will have influence to capability to earn profit by smaller banks alone because the small commercial bank has increase profit from increase market share. This group of banks has increase profit from increase market share. From the study it is found that the expenses in administration is a very important factor effecting the capability to earn profit by all groups of bank. Therefore, the banks must pay attention in the management of expenses in administration, especially in personnel, so that the cost of operation may be lower and result in the bank to have higher profit. In income of the commercial bank, income from interest, there is growth which fluctuate with the expansion and quality of credit and deposit, including difference in interest at different period of time. The bank must pay attention to income from the fee.
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Appears in Collections:GS: Theses / Independent Studies

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