Determining Bank Profitability in U.K. Emerging Market: An Analysis

This report delves into the determinants of bank profitability within the UK's emerging market, with a specific focus on HSBC. The research investigates the impact of various factors, including bank-specific, macroeconomic, and industry-specific variables, on profitability. The study examines interest rates, market structure, and management practices, and their influence on bank performance. The report includes an analysis of data collected from customers to understand their perceptions of interest rates and banking operations. Furthermore, it explores the significance of evaluating profitability, literature gaps, research methodologies, and ethical considerations. The findings are presented through descriptive statistics, econometric results, correlation matrices, and regression analysis, leading to a comprehensive conclusion and recommendations for future growth and sustainability of banks in the UK. The report also includes an executive summary, literature review, and references.

Determines Bank Profitability
in U.K. Emerging Market

Table of Contents
EXECUTIVE SUMMARY ............................................................................................................3
TITLE: “Determines Bank Profitability in U.K. Emerging Market”.............................................1
CHAPTER 1: INTRODUCTION....................................................................................................1
Overview of the Research .....................................................................................................1
Background of the study.........................................................................................................1
Significance of the research....................................................................................................2
Research aim..........................................................................................................................2
Research objectives................................................................................................................2
Research Questions................................................................................................................2
CHAPTER: 2 LITERATURE REVIEW.........................................................................................3
Effectiveness of evaluating determinant of profitability.......................................................4
Analysis of primary objectives...............................................................................................4
Literature gap..........................................................................................................................5
CHAPTER: 3 RESEARCH METHODOLOGIES .........................................................................6
Research approaches..............................................................................................................6
Analysis of data: ....................................................................................................................7
Limitation of the research: .....................................................................................................8
Ethical issues present in a research .......................................................................................8
CHAPTER: 4 FINDING AND DISCUSSION ..............................................................................9
Results of descriptive statistics.............................................................................................11
Discussion of econometric results........................................................................................11
Correlation Matrix: ..............................................................................................................11
Regression analysis:.............................................................................................................12
CHAPTER: 5 CONCLUSION .....................................................................................................17
REFERENCES..............................................................................................................................19

EXECUTIVE SUMMARY
This project summary report is providing crucial information about various aspects those
are related with determinant of profitability in banking sectors in UK. In order to determine
overall growth and performance of all those implication those are related with UK banks are
analyse under this report. Evaluation of HSBC bank financial condition and its overall
profitability can be determine by using various data which are collected in this project. The
primary motive is take into consideration about all those specific characteristics which are
helping banks to increase their overall performance as compare to other banks. The aim of this
project is to evaluate necessary aspects those are associated with banks in order to determine
their future profitability.
However, there are certain research methodologies is being used that can assist in proper
analysis of financial position of the various banks those are operating in UK. On the basis of data
collected from various customers those are local residence of UK to know about some specific
aspects that are related with banks. Further, this report is analyse by determine by evaluating
crucial finding and on that basis certain recommendation is being made. This will assist in future
growth and sustainability for banks in UK.

TITLE: “Determines Bank Profitability in U.K. Emerging Market”.
CHAPTER 1: INTRODUCTION
Overview of the Research
The current study provide complete study to determine variable that would make impact
on the profitability of UK banks. This particular research will provide proper evidence of crucial
bank specific, macroeconomic and industry specific variables. The financial markets of UK are
in transition because of deregulation and liberalization measures. Some aspects would have to be
facilitate greater competition and improve the operations transparency. It has been seen that
service sectors have shown a remarkable presence in business in internal market (Al-Jafari and
Alchami, 2014).
The banking sector has been continuously subject to effective change from so many
years. The primary aspect to be investigated under this reports is to determine interest rate which
would lead to maximising profitability in UK banks. In common terms, as interest rates reduced
maximum people are able to borrow maximum funds from banks. Because of this, consumers
have more amount to spend that cause economy to grow and at the same time inflation will
increase (Tucker, Hall and Pattani, 2013).
Background of the study
The management of bank is more appropriately associated with evaluating profitability of
banks is an essential aspect for analysing overall impacts and gains those are being seen over the
past few year. It has been seen direct impacts on productivity of banks which is possible to
develop competitive edge in banking sectors at the marketplace. Under this study some crucial
issues would be related with HSBC banks are being discuss. It is one of the British multinational
banking as well as financial service company. HSBC Bank plc offers various banking products
and services across worldwide (Al-Najjar, 2013). The company agreed to accept various deposits
such as current, savings and business bank accounts. It has been operated through Retail Banking
and wealth management, global banking and markets. This seems to have one of the seventh
largest bank in terms of total assets with maximum of US$2.374 trillion. It is started their
operations from London in 1991. they are having maximum number of offices with 3900 in 67
countries and other territories across other nations (Company Overview of HSBC Bank plc,
2018). The profitability will be determine in banking sector have been explore and observed in
this particular segment.
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Significance of the research
The motive behind selecting this particular research topic is to know about all those
impacts and growth those are being associated with HSBC and other banking services in UK.
Some studies will taken into consideration only the characteristics of banks itself as to
determinants of profitability during entire research by considering macroeconomics factors. With
the privatization of public sector banks have modified the ownership background of the banks.
Research aim
The main aim of this research is to determine all those factors which are present in
banking sectors and make proper solution to increase their overall growth and profitability. As a
researcher, it would be primary role to make analysis of factors those are affecting the business
and provide valuable outcomes to the company (Alessandri and Nelson, 2015).
Research objectives
The primary purpose behind this topic is to analyse :
 To identify the implication which are being faced by HSBC and other banks those are
operating in London.
 To analyse the measure which are used by banking sectors in order to attaining
profitability.
 To evaluate management operations of banks so that they would attain maximum growth
in near future.
 To understand customers perception about banks interest rates.
Research Questions
Q1: Does market structure matters on Banking sector ?
Q2: Do You agree that valuable management in the banking sectors which would contribute to
increase profitability of HSBC ?
Q3: How does client react in respect to operational aspects of banking sector ?
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CHAPTER: 2 LITERATURE REVIEW
According to Bhaumik, Dang and Kutan, (2011) European banks earning will be
increasing by the average of 5-6 percentage in case Eurozone rates get increase by 10 normal
points. Literature would provide plenty of other evidences which would determine major aspects
of banks profitability. The research has conducted on UK banks which is more profitable in that
particular country. Although, the research is mainly focused on HSBC specific variables those
are major determinants of banks profitability in UK. The factors being analyse entirely on banks
related matters and to present their overall management performances.
In the opinion of Chortareas, Garza-García and Girardone, (2012), it is necessary to
understand all those crucial measure and those are making huge impacts on overall profitability
and growth of HSBC banks. The proper knowledge about increase or decrease in interest rates
would be analyse in more specific manner. Management of capital is utmost important to an
organisation to gain profitability for maximum period of time. This will be reduce opportunity
costs connected with total investment of inventories and account receivable and valuable aspects
those are with daily business operations of Banks.
In the view point of Claessens and Van Horen, (2013), acknowledgement of this
particular statements will indicate that maximum interest rates is more likely to be organise that
will be profitable for the banking sectors. It will be helpful for them to get maximum
opportunities in every years as interest rate gets fluctuating. With the eminence administration
leads to make superior performance in HSBC. However, it is difficult to evaluate performance of
banks directly. For this purpose, a researchers needs to make evaluation of various types of
financial statements. By using balance sheet of HSBC present time will ensure that financial
position of a particular banks, firms or organisation can deliver important data regarding proper
allocation of resources.
On the other hand Claessens and Yurtoglu, (2013), balance sheet items are more worthy
indicators of a potential and capabilities of HSBC banks in relation to determine stability and
total earning in the market. It would provide more crucial information about the company last
and current year financial position through analysing variety of variables that would make
influence on banks overall performance. Some variable would taken into consideration in the
literature review about deposits, assets, debt obligations, capital ratios, credit risk assessment and
productivity of the company. By capital adequacy ratio would make impacts on entire
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performance of banks. As per Dincer and et. al., (2011), a positive relationship among banks
profitability and capital ratios are being determine effectively during the time. They have
conducted a comprehensive analyse for both developing and developed nations. The maximum
analysis is being focus on evaluating performance of commercial banks in comparison to other
banks those are operating in UK. Very minimum of them are dealing with determinant of banks
profitability. For instance, using necessary data from HSBC, one can make crucial analysis about
the overall performance and operations of effective banks. The research will be found that banks
overall profitability will increase the leverage in high and the loan to assets ratios which is large
but would decrease in case reserve ratios become high. To consider profitability of HSBC banks
alone Garza-García, (2012), evaluate a wide range of variable just as capital, overhead, gross
domestic product (GDP) and other conventional interest rates. By this contrast, loan ratios and
banks overall structure were negatively associated with profitability position of banks.
Effectiveness of evaluating determinant of profitability
Under the given scenario, determinant of profitability in banks sector would be
considered as an essential element for every financial institution to attain their overall business
objectives. It is more difficult to deal with all those aspects those are making impacts on the
operation of HSBC banks. In recent past, plenty of businesses have emphasizes on overall
performance of banks growth in order to increase their market share as well as future
sustainability (Tanna, Pasiouras and Nnadi, 2011). Henceforth, it is through continuous auditing
of their accounting information that effectiveness of employer can be improve over the period of
time. The direction of causality among spacing and profitability would runs from market
structure of a sector to evaluate behaviour that would make huge impacts on the overall
performance of department.
According to Giannetti and Ongena, (2012) most researcher use to evaluate all
determinant of banks performance which is based on traditional methods. It would be more
effectively helpful to analyse various impacts those are affecting profitability of a banks. It has
been found that a positive relation among market concentration and banks profitability in UK
and other parts of the nations.
Analysis of primary objectives
According to the mention objectives which is being use for the purpose of making proper
analyses about determinant of profitability in banks. As presented crucial objectives, it has been
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seen that all those implications which are making impacts on overall productivity of the company
can be determine by using vital tools and techniques. A well effective planning is needed to be
done to resolve al those issues those are arises in banks operations. At the same time, effective
management systems would needed to be followed by HSBC banks in their everyday business to
record and analyse their financial transactions (Talavera, Tsapin and Zholud, 2012).
Literature gap
It is said to be in-depth study of any research which is being carried for the motive of
determining relationship among determinant of profitability in banking sectors. The analysis of
past literature would analyse that profitability would be primary aspects that can leads to increase
maximum earnings and overall success of HSBC banks. It has been that literature reviews would
define past data by indicating effective role of each and every department which is working for
the purpose of increase overall growth in coming future. Likewise, the literature is unable to
analyse proper link among customers perceptions and banking operations. The rate of interest
would be control and manage in order to draw attention of maximum people. It present complete
light on particular aspects of research which would make entire emphasizes on determining
proper growth of banks in coming time (Kapan and Minoiu, 2013). A bank is said to be proper
linked among customers that have capital deficits and customers those are related with capital
surpluses. Based on certain research questions, some vital research hypotheses is being
presented:
 H1: Macroeconomic indicators cannot make impact on banks profitability.
 H0: Some indicators would make impact on profitability position of banks.
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CHAPTER: 3 RESEARCH METHODOLOGIES
This particular chapter provide valuable research analysing which is being based on
determinant of profitability in various banks those are operating in UK. This evaluation is done
by using various research tools and method those are helpful for researcher to reach at their
valuable solution. It is one of the crucial and systematic analysis of all those methods which is
been applied in a specific field of research operations. This can consists of both present and
historical data.
Essentially, this process will be more helpful for researchers to go through various works
which is being describe, explain and vital outcomes can be done. There are various research
design which can consists of descriptive, experimental, qualitative and quantitative. This
particular research is based on qualitative research. The primary reason behind this approach is
to provide statistical data which is would deliver researcher an effective comparability study
about a given problems (Kearney, 2012).
Research approaches
It has been seen that various kind of research methods which is being helpful in analysing
overall solution to any banking issues. As mentioned under the topic about increase or decrease
in interest rate would highly impacts overall profitability of banks. Some vital methods of
research are:
Qualitative research:
This is an essential method of making proper enquiry about various aspects which would
consists of certain valuable facts. It is said to be process of collecting, analysing and making
interpretation of crucial facts collected from a research work (Tabak, Fazio and Cajueiro, 2011).
Quantitative research:
This form of research relies on overall techniques of natural aspects which are produce on
numerical data and have hard facts. It would be aims at establishing causes and effective
relationships among two variables. It is known as empirical research as it can be accurately and
exactly measured (Saqib and Waheed, 2011).
Sampling: In order to measure a small portion of something and to make a general
statement regarding entire things. It is an effective process of selecting a number of units for
conduction a research in such a ways that every units represent wide group from which are
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chosen. A total sample size of 60 respondent is being selected for making a well effective
research is mentioned under this particular research.
Reliability: It is a common quality of an object which is having ability to perform a
desire operation. It is sustaining vital values of rates operational indicators in given period of
time. It is probability that each activity of an appliance which is mentioned under a given period
of time. It is use to measure all those extent to which the measurements process is being entirely
free from random errors (Marois, 2012).
Validity: It is an effective measure which is extent to which measurements procedures is
free from systematic and random errors. It is mostly related with all those questions which are
being collected from a research work. It must be presenting more reliable outcomes to a given
research issues.
Analysis of data:
In order to make proper analysis of collected information from a research about
determinant of profitability in banking sectors. For this purpose, researchers would needed to
make evaluation of all reviews those are taken from selected respondents. Some specific themes
would be required to analyse by using various charts. Some of them are discuss underneath:
Theme :1 Does market structure matters on Banking sector ?
Particular Frequency
Yes 40
No 15
Can't say 5
Total 60
Theme: 2 Do you agree that valuable management in the banking sectors which would
contribute to increase profitability of HSBC ?
Particular Frequency
Highly Agree 25
Agree 18
Highly disagree 10
Disagree 7
Total 60
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Theme: 3 How does client react in respect to operational aspects of banking sector ?
Particular Frequency
Positive 35
Negative 15
Neutral 10
Total 60
Limitation of the research:
There are various benefits and limitation that are collected during a research process. The
time factors as well as money would be the primary research which would make huge impact on
the profitability position of the company. In the quantitative evaluation of operations research,
certain assumption and valuation are made for assigning quantitative factors those are present in
a research. This happens to be a secondary for entire process of decision making. All those
internal factors those related with banking sectors cannot be quantified accurately and all
important factors cannot be covered in a single format (Olson and Zoubi, 2011).
Ethical issues present in a research
There are various legal, ethical obligation towards research participant,founder and
banking institution. It is necessary to make analysis of all crucial policies and services to storage
and backup plans to deal with any issues those are making impacts from outside. Implementation
and reviews of administration departments to make use of data during any project meetings and
evaluation.
Secondary sources of data collection: It refers that sources which would helpful to
make comparison of all necessary data which are already being published. This can save
maximum time and costs of researchers. There are various sources from which secondary
informations can be collected such as government department, management records and other
crucial places. Some of the effective tools which has be taken into consideration are picture,
graphs, journals, historical data and stories. It would assists HSBC banks to make evaluation of
their current year profitability position by considering last year results. For this purpose, they
need to make use of various financial statements and ratios analysis (Radić, Fiordelisi and
Girardone, 2012).
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CHAPTER: 4 FINDING AND DISCUSSION
This particular section of research would make entire focus on drawing valid and more
reliable outcomes collected from banking sectors. The researcher must be able to summarise all
essential results which has been collected during the survey. By this course of action, researcher
is able to determine valid solution from a given set of issues. This specific chapter is more
important as researcher use to consider more reliable overviews from entire research work. This
study which is being made over taking making consideration over analysing determinant of
profitability in banking sectors. The overall analysis is done to determine exact impacts those are
being faced by HSBS banks on examining opportunities within an organisation. This chapter
investigate all those effects of market structure, banks specific characteristics and overall
financial position or stability of 308 banks in emerging economies.
According to the above mentioned analysis, there are various recommendations regarding
enhancing the profitability of Banking sector. As the management of HSBC required to adopt an
effective business policies and strategies in order to improve the business functioning of banks
which directly make positive impact on their profitability situation. Although internet banking
should also required to adopt in banking industry in order to make easy way for their customers
to make bank transactions without reaching to their branch. This will maximises interest of
customers to go for bank services and utilizes them for their own benefits. HSBC are also
required to communicate with their customers and inform them about various banking services
such as loan facilities, credit facilities etc. The internet banking also required to asses their
internal security system equipments in order to focus on strong security processes.
The main findings for other determinants of bank performance should be described as
below. These findings have several consequences for policy makers in emerging economies.
There are number of small number of banks in emerging economies which imposed high interest
rate on loan amount which help in increasing the profitability of banking sector. The manager of
HSBC is held liable to remove all unnecessary restricts and barriers entry in establishing new
private banks and also provide condition in which international banks are motivated to enter the
market. Bank managers in emerging economies should undertake the necessary measures to
enhance the role of capitalisation and to create efficient cost control and liquidity in order to
further increase bank's profitability. The other determinant of this study is that the banking sector
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