Bank Profitability During Recessions

Bolt, Wilko; Haan, Leo de; Hoeberichts, Marco; Oordt, Maarten van; Swank, Job

doi:10.2139/ssrn.1948483

Cited by 35 publications

(71 citation statements)

References 25 publications

(23 reference statements)

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“…These findings confirm anecdotal evidence suggesting that African financial markets were well-protected from the effects of the financial crisis. The results are consistent with recent studies showing that bank profitability is pro-cyclical and therefore sensitive to macroeconomic conditions including productivity growth and inflation (Athanasoglou et al, 2014;Dietrich & Wanzenried, 2014;Bolt et al, 2012;Rumler & Waschiczek, 2010;Albertazzi & Gambacorta, 2009;Bikker & Hu, 2002). Panel data analysis results reveal a significant relationship between bank-specific determinants (size, cost management, and liquidity) and bank profitability (ROA) before, during and after the financial crisis.…”

Section: Introductionsupporting

confidence: 91%

“…size, capital strength, credit risk, cost management, liquidity, and bank's market power), industry-specific (ownership and concentration), and macroeconomic conditions such as growth in productivity and inflation (Athanasoglou et al, 2014;Dietrich & Wanzenried, 2014;Bolt et al, 2012;Rumler & Waschiczek, 2010;Albertazzi & Gambacorta, 2009;Bikker & Hu, 2002). According to Dietrich & Wanzenried (2011) these studies are important because of the significance of bank profitability for the stability of the banking industry on the capital markets and the economy as a whole especially in the light of the recent financial crisis.…”

Section: Introductionmentioning

confidence: 99%

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Determinants of bank profitability before, during, and after the financial crisis

Adelopo

Lloydking²,

Tauringana

2018

IJMF

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Purpose The purpose of this paper is to report the results of an investigation into the relationship between bank-specific, macroeconomic factors and bank profitability before (1999-2006), during (2007-2009), and after (2010-2013) the financial crisis. Design/methodology/approach Using the Economic Community of West African States’ bank panel data from 1999 to 2013, the paper used fixed effect models. The panel model includes bank-specific determinants (size, cost management, and liquidity), industry level, and macroeconomic variables. Findings Panel data analyses results show that there is a significant relationship between bank-specific determinants (size, cost management, and liquidity) and bank profitability (ROA) before, during, and after the financial crisis. However, the relationships between other bank-specific (capital strength, credit risk, and market power), macroeconomic (gross domestic product and inflation) determinants are sensitive to both periods of analysis (before, during, and after financial crisis) and bank profitability measure used (ROA or NIM). Originality/value Overall, these results suggest that the financial crisis did not affect the relationships between some bank-specific determinants and bank profitability.

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Section: Introductionsupporting

confidence: 91%

Section: Introductionmentioning

confidence: 99%

Determinants of bank profitability before, during, and after the financial crisis

Adelopo

Lloydking²,

Tauringana

2018

IJMF

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“…the ratio of bank profit to total assets, and aggregate output. Albertazzi and Gambacorta (2009), Bikker and Hu (2002) and Bolt et al (2012) find that this correlation is significantly positive in the data. 24 While our model implies that bank profitability is pro-cyclical, it is counter-cyclical in the alternative models where banks are insulated from aggregate loan losses.…”

Section: Final Assessmentmentioning

confidence: 81%

“…For example, Tornell and Westermann (2002), Pesaran et al (2006) and Marcucci and Quagliariello (2009) show that a slump in the economy increases loan losses. In turn, loan losses dampen banks' profits (Bolt et al, 2012), thereby adversely affecting bank capital. The latter gives rise to a tightening of credit conditions (Gambacorta and Shin, 2016), which in turn exacerbates the recession.…”

Section: Introductionmentioning

confidence: 99%

Unexpected loan losses and bank capital in an estimated DSGE model of the euro area

Hristov

Hülsewig

2017

Journal of Macroeconomics

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. We develop a stylized DSGE model in which banks face capital regulation and their loan portfolios are subject to non-diversifiable losses due to aggregate shocks. The framework is used to explore the importance of the interaction between macroeconomic conditions, credit default and bank capitalization for the transmission of macroeconomic shocks. We fit the model to euro area data. Impulse response analysis shows that the aforementioned interaction substantially magnifies the responsiveness of the economy to real and nominal demand side disturbances. The amplification is especially strong with respect to government spending shocks. The model is further capable of replicating two financial market characteristics that are documented in the empirical literature, i.e. the pro-cyclicality of bank profitability and the counter-cyclical response of firm default rates and credit spreads to monetary policy shocks. Terms of use: Documents inJEL-Codes: E440, E510, G210, G330.

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“…The successful implementation of different business models depend on a series of bank attributes and on the market environment like operating efficiency (Kwan and Eisenbeis, 1997), capital (Baele et al, 2007), securitization (Boot and Thakor, 2010), funding sources (Demirgüc-Kunt and Huizinga, 2010), corporate governance (Laeven and Levine, 2009), central bank liquidity (Altunbas et al, 2011), or, business cycles (Bolt et al, 2010).…”

Section: Literature Reviewmentioning

confidence: 99%

Bank Business Models and Performance During Crisis in Central and Eastern Europe

Andrieş

Mutu

2017

Review of Economic and Business Studies

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Bank Profitability During Recessions

Cited by 35 publications

References 25 publications

Determinants of bank profitability before, during, and after the financial crisis

Determinants of bank profitability before, during, and after the financial crisis

Unexpected loan losses and bank capital in an estimated DSGE model of the euro area

Bank Business Models and Performance During Crisis in Central and Eastern Europe

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