Impact of Financial Risks on Sustainable Growth and Profitability in BIST 100 Deposit Banks

This study examines the statistical associations between financial risk factors and both profitability and sustainable growth performance of seven deposit banks listed on Borsa Istanbul over the period 2014-2024. The theoretical framework is revised to avoid treating banks merely as passive intermediaries of pre-existing savings. Instead, the study recognizes deposit banks as credit-creating institutions whose lending activity, balance-sheet composition, capital position, liquidity structure, and risk exposure jointly shape sustainable performance. Employing a panel data framework, the analysis first tests for cross-sectional dependence and slope heterogeneity, followed by the assessment of stationarity using second-generation unit root tests. The empirical models are estimated through Panel Estimated Generalized Least Squares (EGLS) with Period Seemingly Unrelated Regressions (SUR) weighting, ensuring robustness against contemporaneous correlation and heteroskedasticity. The findings reveal that financial risk indicators are predominantly associated with a deterioration in bank performance metrics. Specifically, credit risk emerges as a critical determinant adversely affecting both internal growth and sustainable growth rates, whereas liquidity risk and capital adequacy risk exhibit stronger explanatory power for variations in return on assets. These results underscore the multidimensional nature of risk-performance dynamics in banking. Overall, the evidence suggests that sustainable bank performance is jointly constrained by multiple financial risk channels, and that relying on a single performance indicator may yield incomplete or potentially misleading assessments. The study contributes to the literature by providing a comprehensive, risk-integrated evaluation framework for bank performance while acknowledging that banking-sector sustainability also involves systemic risk, asset quality, market structure, and macro-financial resilience.