Related Papers
The Effect Of Revenue And Geographic Diversification On Bank Performance
2013 •
Valeria Venturelli
This paper investigates the effect of revenue and geographic diversification on bank performance, also on a risk adjusted basis. Using an unbalanced panel dataset of 3,002 observations relative to Italian banks for the period 2006-2011, the core question is to analyse the effect of geographic and functional diversification across and within both interest and non-interest income and their effect on some principal performance measures. Furthermore in our study we analyse whether certain type of institutions are better able to reap the benefits of diversification analysing performance implications for different categories of banks and if the results have been affected by the financial crisis. The main results suggest that revenue and geographical diversification play a role in determining bank performance. The relative effects appear, however, to be different between mutual and not-mutual banks suggesting different business strategies for different banks. Moreover, in the after crisis ...
Impact Of Income Diversification, Size and Capital Ratio on Performance. Evidence from banking sector of Pakistan
Saqib Sultan
Income Diversification in the Banking Sector and Earnings Volatility: Evidence from Kenyan Commercial Banks
2012 •
josephat kiweu
This paper investigates whether diversification of income sources for Kenyan banks leads to better earnings and reduced individual bank and systemic risks. The study seeks to analyze the extent to which observed shift toward fees income generating activities has improved bank performance and reduced volatility of revenue. The findings show that there are few benefits, if any, to be expected from income diversification from traditional banking although there is growing importance of non-interest income during the study period 2000 – 2010. The benefits of the evolution of non-interest income do not seem to fully offset the increase in risk that come with fee based income. A positive correlation between net interest income and non-interest income seems to exist, a finding that suggests that non-interest income may not be used to stabilize total operating income. The findings also reveal that lending rates are significantly correlated with net interest income, and the relationship is ne...
Financial Innovation
Diversification, bank performance and risk: have Tunisian banks adopted the new business model?
2017 •
Helmi HAMDI
VIKALPA The Journal for Decision Makers 40(1) 28–41
Banking Innovations and New Income Streams: Impact on Banks’ Performance
2015 •
Smita Roy Trivedi
Banks in India have focused on non-interest income streams to complement their income from traditional interest earning activities for some years now. This move to innovation adoption and new income streams has been more pronounced for new private and foreign banks, while there appears to have been certain hesitation on the part of public sector and old private banks. This article studies the impact of the move to new income streams and the consequent rising diversification on performance (as measured by profitability and stability of income) for Indian banks. A comparative analysis of income generated from these income streams for different bank groups in India shows that new private banks and foreign banks in India have been more successful than public sector banks in generating a greater proportion of their income from non-interest and fee-based sources. However, this increasing diversification cannot be linked to better risk-adjusted performance in the Indian context. The article finds that the rising share of fee-based income and non-interest income in total income and diversification has a positive impact on profitability, but the impact on risk-adjusted performance and hence stability is not statistically significant. While the results show a positive impact of diversification on profitability, the article underlines that the impact direction of diversification measures may be negative, which is in agreement to what many studies have shown in the US, European, Australian and Indian contexts. This article considers the impact of diversification in non-interest income separately from diversification in total income. This diversification score helps to know if the banks are generating their non-interest income from only fee income or only their own investments or have they diversified the non-interest income generation by focusing on both. Importantly, there is a positive impact of increasing share of ‘fee income’ in both total income and non-interest income on profitability as well as risk-adjusted measures. The results underscore that while public sector banks need to generate more income from fee-based activities, it would be imperative to choose sources of fee-based income that remain stable and have a positive impact on risk-adjusted measures. Using multiple regression analysis, the impact of diversification and increasing share of fee-based income on profitability and risk-adjusted profitability is questioned for all banks in India over the period 2005–2012. The article finds that the rising share of fee-based income and non-interest income in total income and diversification has a positive impact on profitability, but the impact on risk-adjusted performance and hence stability is not statistically significant. While the results show a positive impact of diversification on profitability, the article underlines that the impact direction of diversification measures may be negative, which is in agreement to what many studies have shown in the US, European, Australian and Indian contexts.This article considers the impact of diversification in non-interest income separately from diversification in total income. This diversification score helps to know if the banks are generating their non-interest income from only fee income or only their own investments or have they diversified the non-interest income generation by focusing on both. Importantly, there is a positive impact of increasing share of ‘fee income’ in both total income and non-interest income on profitability as well as risk-adjusted measures. The results underscore that while public sector banks need to generate more income from fee-based activities, it would be imperative to choose sources of fee-based income that remain stable and have a positive impact on risk-adjusted measures.
The Impact of Off-Balance-Sheet Activities on Banks Returns: An Application of the ARCH-M to Canadian Data
2009 •
Christian Calmes
How Did Revenue Diversification Affect Bank Performance in Emerging Economies During the Financial Crisis
2014 •
Linh Chi
Income Structure, Profitability and Stability in the Tunisian Banking Sector
Engineering Journal Publication of Research work
— This study examines the effect of revenue diversification across and within interest and non-interest income on bank stability and performance in Tunisian banks over the period 2001-2014. Using panel estimations and instrumental variables approach to handle the endogeneity problem of diversification variables. We find that revenue diversifications among and within interest and non-interest revenue generating operations boost bank profitability and stability. Our findings suggest also that the benefits from diversification are largest for banks with more shifts to nontraditional banking business lines (investment banking) while, absent for banks which follow cross-selling strategies of financial services. Keywords— bank performance, bank stability, interest income, non-interest income, Tunisian Banks.
Impact of Asset Liability Management on Non-Interest Income of Banks in Nigeria
Achori Emmanuel
Banks are very important organizations which aid in the execution of socioeconomic activities undertaken by individuals, business organizations and even sovereign states. They serve primarily as a medium which bridges the gap between surplus and deficit units in an economy. The theoretical rationale of this study is strong competition among banks in the banking industry and its effect on asset-liability management. If a bank is not competitive at matching duration of assets and liabilities, it is exposed to more risk. Does this make this bank more likely or less likely to focus on fee income generation? If a bank is competitive at matching duration of assets and liabilities, it is also exposed to risk. Does the bank leverage on this comparative advantage to focus even more on fee incomes, or do fee incomes become less important to the bank? These are questions to which the literature to the best of knowledge has yet to proffer an answer. Purposive sampling method will be adopted where the twelve deposit money banks to be considered will be arrived at after computing average total assets (representing bank’s size) of the nineteen (19) banks. After this process, ranking and selecting of 4 large sized banks, 4 medium sized banks and 4 small sized banks will be selected. The model allowed for both heteroscedasticity and autocorrelation as a result the use of Ordinary Least Square (OLS) regression was employed in the estimation of the parameter of the model drawn in this research work. Findings from the study shows Banks' asset liability management have impact on the extent to which non-interest income is a significant component of banks' aggregate performance as evidenced in ALM Ratio and Bank's size measured with total asset is not a general determinant for non-interest income.
SSRN Electronic Journal
Rating Performance and Bank Business Models: Is There a Change with the 2007-2009 Crisis?
2000 •
Vincenzo D'Apice
