Analysis of the relationship between maturity risk and profitability in banking: An application in the Turkish banking sector

Liquidity risk, one of the risks that banks face, consists of the difference in the maturities of the assets in the banks and the foreign resources in the liabilities. There is a maturity mismatch between the deposits, which are the liabilities of the banks, and the loans, which are their assets. The purpose of this study is to investigate how liquidity risk arising from loan-deposit maturity mismatches affects banks' profitability. The study specifically focuses on the impact of the "net liquidity shortage up to 3 months," the best indicator of maturity mismatch, on bank profitability. The study, which uses data from 2003-2023 of 19 commercial banks operating in Turkey, was conducted in two stages. In the first stage, simple linear regression analysis was conducted using quarterly banking sector data and the effect of liquidity deficit on net interest income was investigated. In the second stage, the effects of capital adequacy, balance sheet structure, asset quality and liquidity variables on profitability were examined using panel data analysis. The most important finding of the study is that there is a strong positive relationship between liquidity deficit and profitability. It was observed that as the liquidity risk of banks increases, so, as they have higher liquidity deficits, their profitability also increases. It was also concluded that banks having a strong capital base increases profitability. Another result of the study is that the increase in non-performing receivables negatively affects profitability.