Non-interest income, profitability, and risk in banking industry: A cross-country analysis

Lee, Chien‐Chiang; Yang, Shih-Jui; Chang, Chi-Hung

doi:10.1016/j.najef.2013.11.002

Cited by 134 publications

(165 citation statements)

References 43 publications

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“…Results indicate that noninterest income increases bank profits and also riskadjusted profits. In the same line of idea, Lee et al (2014) investigated the effect of non interest income on bank profitability and risk using bank data of 22 countries in Asia and 967 individual banks over the period [1995][1996][1997][1998][1999][2000][2001][2002][2003][2004][2005][2006][2007][2008][2009]. By performing the dynamic panel Generalized Method of Moment method (GMM), results indicate that non-interest activities of Asian banks reduce risk, but do not increase profitability.…”

Section: Noninterest Income and Bank Performancementioning

confidence: 98%

“…reported the positive impact of non-interest income (NII henceforth) on returns and risks (Ismail et al (2015), Trivedi (2015), Lee et al (2014), Meslier et al (2014) and Saunders et al (2014)), some other papers have found that traditional activities are considered as a key factor for more profitability and less risk (Pringle's (1974), Graddy and Kyle (1979), Molyneux et al (1998), Ramadan et al (2011), Carbó-Valverde et al (2011 and Ekpu and Paloni (2015)). These conclusions show that the effects of non-interest income differ from one country to another one.…”

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confidence: 99%

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Diversification, bank performance and risk: have Tunisian banks adopted the new business model?

2017

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Background: The objective of this paper is threefold. First, we test the most important factors that determine the level of non-interest income for Tunisian banks. Second, we study the impact of non-interest income on banks' profitability measured by both return on assets (ROA) and return on equity (ROE). Finally, we investigate the relationship between non-interest income and the level of risk taking. Methods: To achieve this goal, we used annual data of 20 Tunisian banks during the period 2005-2012. In the empirical section we performed a Dynamic Panel Data model. Results: Empirical results indicate that the main determinants of non-interest income are: relative performance (RROA and RROE), bank size, loan specialization and new epayments channels, automatic teller machine (ATM) and credit cards). We also find that diversification increases bank performance for both ROA and ROE measures. Eventually, non-interest income appears to be negatively and significantly correlated with the effect on the level of risk. Conclusions: Tunisian banks are invited to more diversify their activities and do not focus only on the traditional activity. The noninterest income seems to be associated with a higher level of profitability and a lower risk.

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Section: Noninterest Income and Bank Performancementioning

confidence: 98%

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confidence: 99%

Diversification, bank performance and risk: have Tunisian banks adopted the new business model?

2017

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“…Similarly, DeYoung and Roland (2001), Stiroh (2004a), Stiroh (2006), Rumble (2006), andDe Jonghe (2010) argue that an increase in non-interest income has a negative effect on bank stability, while Chiorazzo et al (2008), Sanya and Wolfe (2011), and Lee et al (2014b) found that income diversification increases bank stability.…”

Section: Introductionmentioning

confidence: 98%

“…On the other hand, authors such as Elsas et al (2010) and Sanya and Wolfe (2011) find a positive association between non-interest income and profitability. Another group of studies concludes that revenue diversification does not increase profitability (Lee et al 2014b;Li and Zhang 2013).…”

Section: Introductionmentioning

confidence: 99%

The Impact of Revenue Diversification on Bank Profitability and Stability: Empirical Evidence from South Asian Countries

Nisar

Peng

Wang

et al. 2018

IJFS

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This paper is a contribution to the ongoing debate on the benefits and drawbacks of bank revenue diversification. Revenue diversification may benefit banks if diversified activities are inherently less risky and possess high returns, while it may hurt banks if diversified activities are more risky and have low returns. Analyzing a panel dataset of 200 commercial banks from all South Asian countries, we found that overall revenue diversification into non-interest income has a positive impact on the profitability and stability of South Asian commercial banks. We further observed that different types of non-interest income-generating activities have different impacts on bank performance and stability. While fees and commission incomes have a negative impact on the profitability and stability of South Asian commercial banks, other non-interest income has a positive impact. Our results imply that banks can benefit from revenue diversification if they diversify into specific types of non-interest income-generating activities. Our findings are robust and relevant to the use of alternative measures of revenue diversification, profitability and stability.

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“…En esta literatura el riesgo de crédito es uno de los factores que siempre se incluyen como parte de la función de rentabilidad, sin embargo, el indicador que casi siempre se usa es la razón de provisiones para riesgos crediticios respecto al total de préstamos, quizá debido a que se trata de una variable de medición muy homogénea. Ejemplos de trabajos que usan esta variable son los de Athanasoglou et al (2006), Dietrich y Wanzenried (2014), Flamini et al (2009), Kanas et al (2012), y Lee et al (2014). El signo esperado de esta variable no está claro.…”

Section: Introductionunclassified

Morosidad en el Pago de Créditos y Rentabilidad de la Banca Comercial en México

Rodríguez

2015

REMEF

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ResumenUna crítica que se formula desde hace varios años a los bancos comerciales establecidos en México es que no incrementan el volumen de crédito que otorgan a la sociedad. Esta crítica se ha vuelto más marcada a raíz del bajo crecimiento económico logrado por el país a partir de la crisis financiera internacional iniciada en 2008. Una de las posibles explicaciones para la restricción de crédito que mantiene la banca es que, dados los sistemas vigentes de identificación y calificación de las solicitudes de crédito, elíndice de morosidad de los prestatarios se vuelve una variable que impacta de manera negativa y significativa a la rentabilidad obtenida por los bancos. Esta hipótesis se analiza mediante un modelo estático con estimadores HausmanTaylor y un modelo de panel dinámico con estimadores Arellano-Bover/Blundell-Bond. Los resultados preliminares sugieren rechazar la hipótesis puesto que los factores determinantes de la rentabilidad son el nivel de capitalización, el tamaño, el nivel total de exposición al riesgo, los gastos de administración y la mezcla de actividades. AbstractOne criticism that is formulated for several years to commercial banks in Mexico is that they do not increase the volume of credit they give to society. This review has become more marked as a result of low economic growth achieved by the country from the international financial crisis that began in 2008. One of the possible explanations for the credit crisis that keeps banking is that, given the existing systems identification and assessment of credit applications, the delinquency rate of borrowers becomes a variable that impacts negatively and significantly to the profitability of banks manner. This hypothesis is analyzed by a static model estimator with Hausman -Taylor estimator and a model of dynamic panel estimators Arellano -Bover / Blundell -Bond. Preliminary results suggest reject the hypothesis since the determinants of profitability are the level of capitalization, the size, the overall level of risk exposure and the administration costs and the combination of activities.

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Non-interest income, profitability, and risk in banking industry: A cross-country analysis

Cited by 134 publications

References 43 publications

Diversification, bank performance and risk: have Tunisian banks adopted the new business model?

Diversification, bank performance and risk: have Tunisian banks adopted the new business model?

The Impact of Revenue Diversification on Bank Profitability and Stability: Empirical Evidence from South Asian Countries

Morosidad en el Pago de Créditos y Rentabilidad de la Banca Comercial en México

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