Performance evaluation of banks by using financial ratios

The economic crisis experienced in 2001 brought about significant structural changes in the Turkish Banking Sector. The Banking Regulation and Supervision Agency (BRSA) has been established and a number of regulations regarding the structural strengthening of banks have been put into practice. These structural arrangements reinforced banks and their equity structure and secured the place of the banking system into Turkey's economy. Naturally, the profitability and performance of the banks have also increased during this period. In this study, performance improvements between the years 2001-2017 have been studied regarding the most important performance indicators using the financial ratios of commercial banks operating in Turkey. For this purpose, a multi-criteria decision-making model has been established with the Analytical Hierarchy Process (AHP) method and a performance evaluation model has been put forward in which banks can be ranked according to their financial ratios. The most critical point in the model is the weighting of financial ratios as well as the scoring of the banks according to their performances. The criterion weighting process was based on the opinions of experts in the banking sector. Two different methods have been used in the scoring of financial ratios of commercial banks, taking into account the quartiles and applying linear normalization process. Findings obtained by both methods were given as input to the AHP model and bank rankings were evaluated according to years and the reasons of the performance changes of the banks were tried to be analyzed.