Does revenue diversification still matter in banking? Evidence from some European countries

Mariarosa Borroni (mariarosa.borroni@unicatt.it) and Simone Rossi (simone.rossi@unicatt.it)
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Mariarosa Borroni: DISCE, Università Cattolica
Simone Rossi: DISCE, Università Cattolica

No dises1723, DISCE - Quaderni del Dipartimento di Scienze Economiche e Sociali from Università Cattolica del Sacro Cuore, Dipartimenti e Istituti di Scienze Economiche (DISCE)

Abstract: Following a common wisdom in banking, revenue diversification is likely to produce a "portfolio-effect" in bank income statement, enhancing the creation of greater and more stable profits. We test this hypothesis on a sample of 110 large commercial, saving and cooperative banks headquartered in 8 EMU countries for the period 2005-2013. Results indicate that diversification strategies have had a role in determining banks profitability only for selected subsamples (and in particular for commercial and saving banks); on the contrary, efficiency and credit portfolio quality have been the main drivers of profits in the period under examination. We contribute to previous literature using a cross-country balanced dataset that covers both the pre-crisis and the following economically troubled periods. Topics underlying this work - and empirical results - have relevant policy implications from a managerial and regulatory point of view.

Keywords: Bank performance; Revenue diversification (search for similar items in EconPapers)
JEL-codes: G21 L25 (search for similar items in EconPapers)
Pages: 32 pages
Date: 2017-03
New Economics Papers: this item is included in nep-ban, nep-eff and nep-eur
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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