An empirical analysis of the relationship between deposit portfolio and profitability: the case of publicly quoted banks and financial institutions in Kenya.

Abstract

Deposits constitute a significant proportion of the total liabilities of banks and financial institutions and their role in financing the operations of these institutions cannot be disputed. Banks and financial institutions periodically revise the minimum balances in their various accounts - savings, current etc and charge penalties for failure of account holders to maintain such stipulated balances at any given point in time.

This exploratory study sought to investigate if any relationship exists between deposit portfolio and profitability of publicly quoted banks and financial institutions in Kenya. Using multiple correlation analysis, correlation coefficients were computed to show the degree of association between after tax prefit •.of these institutions and their deposit

portfolio. The analysis revealed that there exists a positive relationship between these variables but the magnitude of these relationships varied from one firm to another perhaps due to variations in their size, investment policies, etc.