FORMALIZATION OF THE INFLUENCE OF EXTERNAL AND INTERNAL FACTORS ON THE PROFIT OF BANKS

Abstract

The development of banking system of the country depends on internal and external factors which determine final results of banks’ activity. Under such conditions it is very important to reduce the negative impact of these factors on banks’ profit, which characterizes the results of their activity. Investigation of bank profit is represented in works of many domestic and foreign scientists and economists. However scientists do not concentrate on the analysis and estimation of the factor environment in their investigations. According to this, it is necessary to develop complex techniques as to formalization of influence factors of external and internal environment on formation of banks’ profit. The process of formalization influence estimation of external and internal environment on banks’ profit is proposed to be presented as a scientific and methodological approach with the next stages: 1) preliminary analysis of time series of bank profit (loss), explanation of proposed specification of appropriate economical and mathematical model; 2) identification of external and internal factors of influence on factors of banks’ profit; 3) correlation analysis of dependence between external / internal factors and banks’ profit (loss); 4) regression analysis of dependence between factors and banks’ profit (loss); 5) factor analysis of influence factors on banks’ profit; 6) cluster analysis of influence factors on banks’ profit; 7) development of practical recommendations concerning the necessity to correct current and strategic directions of bank’ profit management. The proposed methodology allows selecting the powerful factors of external and internal environment and quantitatively interpreting of their action. Besides, this approach allows estimating the action of both the separate factor and the group factors, which form the cluster. The bank managers can take complex decisions about these factors or gains from them based on the results of estimation.