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Bank Profitability during Recessions (Bolt W., de Haan L., Hoeberichts M., van Oordt M., Swank J.)

Bank Profitability

Abstract This paper estimates the relation between bank profitability and economic downturns using a theoretical model that takes into account the bank’s lending history as well as amortization and losses on outstanding loans. We focus on total bank profits and its components: net interest income, other income, and net provisioning plus other costs. Using both aggregate and individual bank panel datasets, our results confirm that pro-cyclicality of bank profits is stronger for deep recessions than during mild ones. Loan-losses are found to be the main driver of this nonlinearity. We find evidence that each percent contraction of real GDP during severe recessions leads to a 0.24 percent decrease in return on bank assets.
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Libref/ Bolt W., de Haan L., Hoeberichts M., van Oordt M., Swank J. (2010) "Bank Profitability during Recessions", Bank Profitability Working Paper No. 251, pp. 1 - 42
© Программирование — Александр Красильников, 2008
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