The effect of revenue diversification on bank profitability and risk during the COVID-19 pandemic

Xingjian Li, Hongrui Feng, Sebastian Zhao and David A. Carter

Finance Research Letters, 2021, vol. 43, issue C

Abstract: Banks can potentially reduce the variability of their revenue by diversifying beyond traditional lending activities into noninterest revenue sources. We investigate the effect of the COVID-19 pandemic on the relation between the use of noninterest income and bank profit and risk. The economic effect of the pandemic resulted in tightened credit standards and reduced demand for many types of loans. We find that noninterest revenue sources are positively related to performance but inversely related to risk. These results are consistent with a beneficial diversification effect during the pandemic from banks expanding beyond traditional lending sources of revenue.

Keywords: Banks; noninterest income; COVID-19; profit; Risk (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (33)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1544612321000386
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:43:y:2021:i:c:s1544612321000386

DOI: 10.1016/j.frl.2021.101957

Access Statistics for this article

Finance Research Letters is currently edited by R. Gençay

More articles in Finance Research Letters from Elsevier
Bibliographic data for series maintained by Catherine Liu ().