Purpose - The purpose of the paper is to obtain measure of the intellectual capital (IC) performance of quoted banks on the Istanbul Stock Exchange Market (ISE) in Turkey for the period 1995-2004 and test the effect of the intellectual capital performance on profitability. Design/methodology/approach - Data required for calculating intellectual capital efficiencies were obtained from the ISE for the period 1995-2004. The authors measured the intellectual capital performance of quoted banks in ISE using the efficiency coefficient, called Value Added Intellectual Coefficiency (VAIC™), and tested the effect of this intellectual capital performance on profitability using Data Envelopment Analysis (DEA). In addition, three different portfolios were constructed based on three different inputs to observe the effect of the intellectual capital on investors' behavior. Findings - The effect of intellectual capital on profitability on the banking sector on the ISE was calculated as 61.3 percent on average and Portfolio-1, which uses the intellectual capital measure as an input, yields the highest returns among the three portfolios constructed. Research limitations/implications - The study was applied only to quoted banks on the ISE for the period 1995-2004. Practical implications - Thefindings allow the banks to benchmark themselves based on the level of IC efficiency ranking, which is important for the banking sector to develop a strategic plan for their future performance. It may also be deduced that intellectual capital is an important factor for investors. Originality/value - This paper can be considered as one of the most comprehensive studies on testing the effect of intellectual capital performance on profitability in the banking sector using both VAIC and DEA.