Turkish banking sector efficiency analysis for the period of 1990 - 2012 and the relation between crisis and bank efficiency

The precondition of the increase in the efficiency of the banks depends on their ability to compete. Through the banking sector with high competitive power, economic dynamism is promoted, and economic stability is ensured. The alteration in macroeconomic conditions affects th performance of the banking sector and financial stability. This thesis was used the methods of DEA to analyze the efficiency of 19 commercial banks operating in Turkey during the period of 1990 - 2012 for intermediation and profit approach. Malmquist Productivity Index method was used for examining the sources of total factor productivity change of the banks, especially during the crisis period. The datas of the analysis have been grouped by the ownership and scale status in order to investigate how efficiency differs among these groups. In the last section, the regression analysis was performed to examine how efficiency differs according to the macroeconomic and bank specific variables. Productivity loss on the basis of profit efficiency was restricted in the crisis period, while productivity increase in terms of profitability was experienced after the crisis period. Large scale banks experienced productivity increase in terms of intermediation approach whereas small and medium banks were subjected to a little productivity loss. During the period 2003, owing to the progress achieved in the technology and also through the effects of disinflation process, increase occured in total productivity of the banks. However due to the regress in scale efficiency values for private and foreign banks according to profit approach and foreign banks according to intermediation approach during the disinflation period led to takeover and consolidation between the banks. Increase in banks' total loans / total deposit ratio led to increase in productivity. Rise in GDP ratio led to increase in the banks' technical efficiency for profit and intermediation approach. Inflation, ROA and ROE ratio for profit approach had positive effect on banks' total factor productivity, while ROE for intermediation approach had negative effect on banks' total factor productivity. Increase in GDP and nonperforming loans / total loans ratio led to increase in pure technical efficiency for intermediation approach. ROE and total deposit / total assets ratio for intermediation approach had negative effect on scale efficiency, yet ROA ratio had positive effect on scale efficiency. Furthermore non performing loans / total loans ratio had positive effect on technical change. Key Words: Data Envelopment Analysis, Malmquist Total Factor Productivity Index, Bank‟s Efficiency, Crisis, Macroeconomic Indicators, Financial Ratios, Regression Analysis