Business lending and bank profitability in the UK

Ekpu, Victor U.; Paloni, Alberto

doi:10.1108/sef-04-2015-0097

Cited by 14 publications

(22 citation statements)

References 32 publications

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“…(2011) refer to an optimal or equal amount of credit allocation, as a lower (higher) level of credit to the private sector, constraints (overheats) economic growth. In addition, Ekpu and Paloni (2016) confirm that economic growth is positively associated with profitability and business lending by small banks.…”

Section: Notesmentioning

confidence: 54%

Credit ratings, relationship lending and loan market efficiency

Bauer

Esqueda

2017

SEF

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Purpose Using the small-business loan market, this paper aims to test whether a structural shift in access to borrowers’ financial information (i.e. credit ratings) improves market efficiency, thereby improving entrepreneurs’ access to external capital. Design/methodology/approach This research uses the National Survey of Small Business Finance in a conditional logistic regression framework to tease out the marginal propensity to grant lines of credit given the firm’s credit rating – treating both of the events, namely, line of credit and credit ratings, as endogenous variables. This methodology overcomes potential reverse causality issues. Findings The results show that information brokers have allowed small firms to break away from long-term monopolistic lending relationships, thus contributing to more informationally efficient markets. Small businesses benefit from better-informed lenders by having better access to capital. Also, women appear less likely to receive a line of credit even after adjusting for credit ratings. Practical implications This research highlights the importance of credit report awareness/monitoring by entrepreneurs, as the small-business credit rating grows rapidly. Relationship lending is not enough to reach optimal financing costs. These papers call for more regulated credit ratings industry to reduce potential moral hazards. Originality/value This paper tests whether bank lending relationships (soft information) still matter after accounting for credit ratings (hard information). Additionally, this study measures the extent to which information sharing by data services bureaus, a proxy for informational efficiency, has increased allocation efficiency in the small-business loan market.

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Section: Notesmentioning

confidence: 54%

Credit ratings, relationship lending and loan market efficiency

Bauer

Esqueda

2017

SEF

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“…Small banks will increase their capital to absorb the credit risk, while large banks tend to have relatively little capital reserves compared to small banks. Large banks can enjoy economies of scale (Ekpu & Paloni, 2016). Their client base is more likely to include stable, financially sound, and well-established businesses (Kolari et al, 1996), and in general, they have more diversified portfolios across regions and products.…”

Section: Jurnal Keuangan Dan Perbankanmentioning

confidence: 99%

“…Many studies proved that bank capital and lending have positive linear relationship (Gambacorta & Mistrulli, 2004;Berrospide & Edge, 2010;Satria & Subegti, 2010;Francis & Osborne, 2012;Rabab'ah, 2015;Moussa & Chedia, 2016;Kim & Sohn, 2017;Setiawan & Pratama, 2019). Bank capital improves banking performance to generate more profit from lending policy (Kolari, Berney, & Ou, 1996;Subandi & Ghozali, 2013;Raharjo, 2014;Ekpu & Paloni, 2016;Thalib, 2016) and increase their ability to absorb risk (Kamaludin, Darmansyah, & Usman, 2015). Bank capital can maintain a sustainable growth rate and examine whether a structural change occurs following external shocks (Ivashina & Scharfstein, 2010;Acharya et al, 2011;Cornett et al, 2011;Gambacorta & Marques-Ibanes, 2011;Berrospide, 2013).…”

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confidence: 99%

Capital and lending growth of banking sector in Indonesia: Study on the BUKU category

Pratama

2019

Jurnal Keuangan Dan Perbankan

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Mostly, loans are an essential source of income for banks, and capital is used to absorb shocks during default risk. This study examines the effect of bank capital on lending growth in each Commercial Bank based on Business Activities (BUKU) category listed on the Indonesia Stock Exchange (IDX). This research used the fixed effect model. Data obtained from the company's financial report published in the 2010-2016 period. There is an inconsistency effect of bank capital on lending growth in each category. The results showed that bank capital has a significant positive effect on lending growth at all bank samples, BUKU 1, and BUKU 2. Furthermore, bank capital has a significant negative effect on lending growth at BUKU 3 and BUKU 4. Analysis results showed that behavioral lending differs based on their owned core capital. This study implied that BUKU 1 and BUKU 2 tend to implement aggressive strategies to deal with market competition, while BUKU 3 and BUKU 4 prefer to perform the defensive strategy on lending because they have various sources of income that not only depend on the loan. Finally, these findings are in line with policies that have been made by Financial Services Authority (FSA) regarding the categorization of the bank's size based on owned core capital.

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“…There are over 80 small UK banks with assets ranging from less than £100 million to over £10 billion (Ekpu & Paloni, 2016). The six UK retail banks chosen are: Lloyds, HSBC, RBS, Barclays, Santander and Virgin Money.…”

Section: Placing the Six Banks In Contextmentioning

confidence: 99%

“…This shows their huge contribution to the UK gross domestic product and the financial market sector. In lending, in 2016, five of these largest banks controlled 70 percent of business, 50 percent of consumer and 75 percent of mortgage market share, with foreign banks controlling less than 15 percent (Ekpu & Paloni, 2016;BOE, 2016), and other banks, including Virgin Money, managing the remaining 10 percent. In ICA, in 2012, Lloyds controlled a 24 percent market share, RBS 17 percent, Barclays 16 percent, HSBC 14 percent, Santander 9 percent and others 6 percent, including Virgin Money (BBA, 2014).…”

Section: Placing the Six Banks In Contextmentioning

confidence: 99%

Digital banking services, customer experience and financial performance in UK banks

Mbama¹

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Digital banking through telephone, internet and mobile is becoming important for banks' service marketing, especially with the increase in digital device usage and customer demand for financial services. The changing dynamics of banking means that banks' performance is no longer solely dependent on branch sales. Capturing and retaining customers are vital for banks, and digital banking is becoming the tool of choice; however research on how it affects customer experience and UK banks' performance is still limited. This thesis focusses on determining the impact of digital banking services on customer experience and financial performance.The research in the thesis uses a mixed methods approach, utilising bank financial reports, interviews and questionnaires to achieve important results and contribute to knowledge in practice, and in related services, marketing and e-commerce theories. The research adopted Regression, Structural Equation Modelling and Chi-Square analyses in quantitative research, while using Content Analysis in qualitative research. The research takes a broad approach in the investigation of digital banking, customer experience and bank financial performance. It has used qualitative and quantitative analysis techniques to produce, test and triangulate results to increase robustness.The research demonstrates how digital banking enhances banks' profitability. It found that attributes such as perceived value, convenience, functional quality, service quality and digital banking innovation are important in improving customer experience, satisfaction and loyalty, and banks' financial performance. The insights from the three research perspectives have been integrated to develop a new Digital Banking Services, Customer Experience and Financial Performance Enhancement Framework (DiBCEFPEF). The results from the thesis have the potential to assist banks in the provision of services, and improve customer experience and financial performance, such as profitable growth and economic value-adds, through digital banking.iii I would like to show appreciation to others who have been instrumental in the success of this research: the MERI administrators for their prompt response to information requests and helping distribute my questionnaires to Sheffield Hallam University students and tutors. I wish to thank my work colleagues, social media contacts, and the University students and tutors, who helped to fill in the research questionnaire. Without their cooperation and support the important findings in the study would not have been possible. My special thanks go to the case bank for supporting and allowing me to use their resource, and its senior managers, who have helped in the interview data gathering. They have shown great support, and without them the evaluation of this research would not have happened. I also want to acknowledge other banks whose information was used, which made it possible to generate a lot of new knowledge.My thanks go to Professor and Mrs A.U Awuzie, Dr B. Ofoegbu and Mr F.N.D. Ofoegbu, who hav...

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Business lending and bank profitability in the UK

Cited by 14 publications

References 32 publications

Credit ratings, relationship lending and loan market efficiency

Credit ratings, relationship lending and loan market efficiency

Capital and lending growth of banking sector in Indonesia: Study on the BUKU category

Digital banking services, customer experience and financial performance in UK banks

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