The Impact of Cost Control on the Profitability of Commercial Banks

Abstract

There are 10 commercial banks operating in Kosovo today and they make up 65 percent of the total assets of the financial sector. Their products and services include bank accounts, loans, local and international payments, bank cards, bank guarantees, letter of credit, e-banking. The structure of assets according to the first quarter of 2020 is dominated by loans totaling 4,721.9 million euros, while the structure of liabilities of the banking sector is dominated by deposits in the amount of 3,845.4 billion euros. Commercial banks in Kosovo have different shareholder structures. Eight of them are banks with foreign capital and two with domestic capital. The purpose of this research is to investigate the impact of cost control on the profitability of banks. The research was done through multivariate regression, where as dependent variables we have Net Profit Margin (NMF), Return on Equity (ROE) and return on assets (ROA) and as independent variables we have interest expenses, salary expenses and provisions expenses. Profitability is the term that refers to the ability of the institution to maintain its profit year after year. Based on the linear regression model, it is found that in one of the dependent variables two dependent variables have a significant impact, while in the other two dependent variables only one of the independent variables has an impact.