This paper aims to explore the bank-specific and macroeconomic determinants of the banks’ profitability by dividing the Turkish deposit banks into large-scale and small-scale entities. For this purpose, panel data analysis was applied using a fixed effects model, based on quarterly data for the period from March 2009 to September 2020 for 24 deposit banks. Return on assets and return on equity are used as a measure of the banks’ profitability. According to the results, the determinants of profitability differ between large-scale banks and small-scale banks. With respect to the bank-specific determinants, the findings show that the equity/assets, deposits/assets and liquidity ratio have a significant impact on the profitability of large-scale banks, whereas they have no relationship with the profitability of small-scale banks. The profitability of large-scale banks is negatively affected by their asset quality ratios. On the other hand, while the ratio of loans to total assets has no impact on the profitability of small-scale banks, the non-performing loan ratio has a positive impact. While the asset size and income-expense ratios have positive and significant impacts on the profitability of small-scale banks, they exhibit no relationship with the profitability of large-scale banks. With regard to macroeconomic indicators, small-scale banks’ profitability is negatively affected by economic growth, whilst large-scale banks are not. This study is aimed to contribute to the literature by analysing the determinants of Turkish deposit banks’ profitability under the classification of large-scale and small-scale banks.

The aim of this study is to analyze the effect of capital adequacy of Turkish deposit banks on their profitability (ROA). For this purpose, panel data regression analysis was carried out using quarterly data for the period 2007Q4-2020Q3. Capital adequacy ratio (CAR) and the ratio of equity to assets (capital ratio) were used as an indicator of capital adequacy. In addition to these variables, bank-specific and macroeconomic control variables, which have an effect on bank performance, are also added to the model. According to the results, CAR and capital ratio have a positive effect on ROA of banks. In addition, in order to see the effect of the Basel II implementation, the analysis was made under two periods, before and after the implementation of Basel II by Turkish banks. For both periods, the effect of CAR on the profitability was positive at the 5% significance level. Also, a positive and stronger relationship was found between the capital ratio and ROA in the post-Basel II period. This result shows that strong equity structure contributes to high profitability.