Efficiency Dynamics and Structural Characteristics of the Largest Commercial Banks in Turkey1

Recent developments in Turkish economy have forced banks to ac-count for expenses and loan losses while increasing their loan supply to become more profitable. In this context, this study evaluates the effi-ciency dynamics of the largest Turkish commercial banks, by focusing on their lending decisions and profit generating behaviors. Clustering metho-dology is used for grouping banks in terms of structural similarities. DEA Window Analysis method is applied in efficiency analyses. The re-sults mainly indicate that, efficiency level in the sector improved during the study period in general. It was not dramatically affected by the global crisis (in 2008), as well. Individually, banks exhibit different efficiency patterns relative to each other. Foreign banks outperform the others with respect to the efficiency models including only interest expenses and re-venues. However, large-scale Turkish banks improve their efficiencies, when we consider non-interest returns in addition to interest gains. This conclusion implies that, non-interest revenues earned from diversified financial services have a crucial role in bank management. Results also show that, risk-taking behavior was more beneficial than conservative strategies in our analysis period