Factors of profitability growth as a sustainability driver in the banking sector…

Abstract

The Global Financial Crisis clearly demonstrated the dependence of the global economy on the banking sector’s stability. Thus, the main question which arises is sustainability of the banking industry.

The purpose of this paper is to research the factors that ensure sustainable growth in the banking industry. The main reason why sustainability of banks is crucial to the economy is the decision-making process implemented by financial institutions, universal and investment banks in particular, in relation to attraction and distribution of investments among clients and provision of risk management services, for profit.

The methodology used in this paper was a literature review on sustainability of banks and comprehensive analysis of a representative bank in the form of Danske Bank from the point of view of the drivers of profitability and capitalization. Several factors which contribute to the ability to withstand the current turbulent business and economic conditions are: mergers and acquisitions, governance, and pursuit of innovation. The research was mainly conducted through the literature review. Both quantitative and qualitative methods were used to conduct the analysis. The originality lies in an analysis based on the financial statements of the bank for the last 3 years with a focus on the profitability and capitalization dynamics under sustainable growth factors. The fair price of the share will be derived based on the given data and analysed against the current market price.