The Impact of Economic Factors on Bank Profits

Fabio Rumler and Walter Waschiczek ()
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Walter Waschiczek: Oesterreichische Nationalbank, Economic Analysis Division

Monetary Policy & the Economy, 2010, issue 4, 49–67

Abstract: This study examines the impact of macroeconomic changes on bank profits that Austrian banks have experienced over the past 15 years. We used several proxies based on balance sheet data at the individual bank level, as well as macroeconomic variables to capture these changes, and additionally controlled for a number of microeconomic factors. Our estimation is based on panel regression analysis using unconsolidated micro-level data reported by all Austrian banks from 1995 to 2009. While we found that disintermediation (fewer loans in total assets) and the degree of concentration in the banking sector had a positive effect on bank profitability, changes in the ownership structure (privatization and increased foreign ownership), as well as more foreign lending by Austrian banks, did not, on the basis of unconsolidated data, have a clear-cut or significant impact on bank profits. As in other countries, bank profits in Austria are contingent on the business cycle and are positively influenced by the spread between long-term and short-term interest rates.

Keywords: bank profitability; banking market structure; panel econometrics; Austrian banks (search for similar items in EconPapers)
JEL-codes: C33 D40 E44 G21 G32 (search for similar items in EconPapers)
Date: 2010
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Citations: View citations in EconPapers (5)

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