European bank profitability: The great convergence?

Martien Lamers, Thomas Present and Rudi Vander Vennet

Finance Research Letters, 2022, vol. 49, issue C

Abstract: Have euro area banks restored viability in the post-crisis era? We investigate profitability convergence for euro area banks over the period 2009–2020 using the concepts of β and σ convergence and a club clustering algorithm. Our evidence is consistent with a slow catch up of the weaker banks, but we also document that better performing banks converge towards a lower profit level, suggesting a ‘great convergence’ towards the middle. Moreover, we identify a cluster of banks exhibiting dismal profit dynamics, characterized by high cost-to-income and non-performing loans ratios, indicating the need for a restructuring of part of the euro area banking sector.

Keywords: Euro Area banks; Bank profitability; β convergence; σ convergence; Club clustering analysis (search for similar items in EconPapers)
JEL-codes: C38 G20 G21 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (1)

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Working Paper: European bank profitability: the Great Convergence? (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:49:y:2022:i:c:s1544612322003142

DOI: 10.1016/j.frl.2022.103088

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