DefinePK

Research Objective

To investigate the effect of the COVID-19 epidemic on the financial performance of the banking industry in Pakistan, with a comparative analysis of its impact on public and private sector banks.

Methodology

Quantitative research approach using secondary data from annual financial reports of 33 banks (divided into public and private sectors) from 2018 to 2022. Statistical analysis included descriptive statistics, Shapiro-Wilk test, Skewness and Kurtosis normality tests, and the Wilcoxon Signed-Rank test, performed using STATA software.

Methodology Flowchart

                        graph TD
    A["Quantitative Research Approach"] --> B["Data Collection: Annual Financial Reports 2018-2022"];
    B --> C["Sample Selection: 33 Banks - Public & Private"];
    C --> D["Data Analysis: Descriptive Statistics"];
    D --> E["Normality Tests: Shapiro-Wilk, Skewness-Kurtosis"];
    E --> F["Data Not Normally Distributed"];
    F --> G["Non-Parametric Test: Wilcoxon Signed-Rank"];
    G --> H["Analysis of Public Banks"];
    G --> I["Analysis of Private Banks"];
    H --> J["Comparison: Before, During, After Pandemic"];
    I --> K["Comparison: Before, During, After Pandemic"];
    J --> L["Hypothesis Testing"];
    K --> M["Hypothesis Testing"];
    L --> N["Results & Conclusion"];
    M --> N;                    

Discussion

The study found that while the initial impact of COVID-19 on Pakistan's banking sector was relatively minor compared to pre-pandemic levels, the post-pandemic period showed adverse effects. The differential impact on public and private banks suggests that private banks were more severely affected. The findings highlight the importance of government and central bank responses in mitigating the crisis and preparing the sector for future emergencies.

Key Findings

- The COVID-19 pandemic had a minor effect on the financial performance of the Pakistani banking industry when comparing performance during the pandemic to the pre-pandemic period.
- The financial performance of the banking industry was adversely affected when comparing performance during the epidemic to the post-pandemic situation.
- The pandemic had a significant and negative effect on the financial performance of public and private sector banks when comparing during and before the pandemic.
- The COVID-19 outbreak had a positive and insignificant effect on the financial performance of public sector banks when comparing during the outbreak to the post-epidemic situation.
- The financial performance of private sector banks witnessed a negative and significant effect of the outbreak when comparing during the COVID-19 outbreak to the post-epidemic situation.
- For the overall banking industry, H1 (ROA) and H2 (ROE) were rejected, indicating no significant effect compared to the pre-COVID-19 outbreak. H3 (Revenue) was approved, showing a significant effect.
- For public banks, H1 (ROA) was rejected, H2 (ROE) and H3 (Revenue) were accepted when comparing during vs. before the pandemic. When comparing during vs. after the pandemic, all three hypotheses were rejected.
- For private banks, H1 (ROA) was not supported (insignificant effect), while H2 (ROE) and H3 (Revenue) were supported (significant effects) when comparing during vs. before the pandemic. When comparing during vs. after the pandemic, all three hypotheses were supported.

Conclusion

The COVID-19 pandemic had a significant, albeit varied, impact on the financial performance of Pakistan's banking industry. While ROA and ROE showed mixed results, revenue was consistently affected. Private banks appeared to be more vulnerable to the pandemic's negative effects than public banks. The study underscores the need for policy makers and bank managements to consider these findings for decision-making and investment strategies.

Fact Check

- World Health Organization reported approximately 20 billion confirmed COVID-19 cases and around five million deaths globally by November 2021.
- Pakistan announced its initial COVID-19 instance on February 26, 2020.
- IMF estimated COVID-19 cost the global economy $3.86 trillion in lost GDP by 2020.

Mind Map