Abstract
Bank profitability remains a central concern in assessing financial sector resilience, especially in systems undergoing institutional and regulatory transformation. This study aims to examine the impact of key internal structural indicators, namely capital adequacy, management efficiency, liquidity, and market-based funding, on the return on equity (hereinafter – ROE) of the banking sector in Kazakhstan. The analysis uses linear regression based on data from 2013 to 2023, incorporating standardized indicators to measure the relationship between structural financial variables and profitability. The model includes adjusted capital adequacy ratio, pre-tax return on assets, ROE, liquidity ratio based on client deposits, and the share of market-based funding in total liabilities. Results demonstrate that management efficiency has a substantial and statistically significant effect on ROE (β = 11.41, p < 0.01), while capital adequacy, liquidity, and market-based funding show weaker or statistically insignificant effects. The high explanatory power of the model (R² = 0.970) suggests that internal operational factors, rather than the balance sheet, drive profitability in Kazakhstan’s banking sector. A comparative analysis of marginal effects further supports the dominant role of internal operational performance over passive balance sheet structure. The study is complemented by a literature-based framework highlighting mixed evidence on the role of liquidity and capitalization under different institutional conditions. Findings indicate that in transitional financial systems, profitability is primarily driven by internal cost and risk management rather than by regulatory capital levels or external funding strategies. Policy implications should prioritize operational efficiency and coordinated prudential regulation according to system-specific constraints.