Analysis of Financial Soundness of Participation Banks by Bankometer and Z-Score Methods

Abstract

In this research, the financial soundness and solvency of the participation banking sector are examined in the context of Turkey. For this purpose, the situation of five participation banks operating in Turkey (Albaraka Türk, Kuveyt Türk, Türkiye Finans, Vakıf Katılım Bankası, Ziraat Katılım Bankası) has been analyzed based on the 2016-2020 financial data. In the research, Bankometer model developed by Shar et al. (2010) was used to measure the solvency of banks; The Z-Score model developed by Altman (1968) was also used to predict the bankruptcy potential of banks. According to the results of the Z-Score model used in the research, both private and public capital participation banks are at risk of bankruptcy; according to the results of the Bankometer model, it was concluded that participation banks were mostly in the gray zone in the analyzed periods and had the potential to experience financial distress.