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Residential Property Loans and Bank Performance during Property Price Booms: Evidence from Europe

Antonio Martins (), Ana Serra (), Francisco Martins () and Simon Stevenson ()
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Antonio Martins: Universidade da Madeira, Caminho da Penteada, Funchal, Portugal
Ana Serra: CEF.UP and Universidade do Porto
Francisco Martins: FEP, Universidade do Porto
Simon Stevenson: Henley Business School, University of Reading

Annals of Economics and Finance, 2019, vol. 20, issue 1, 247-295

Abstract: Residential mortgage loans constitute a large proportion of the portfolio of many banks and are one of the key assets in the determination of their performance. Using a dynamic panel model for a sample of 555 banks in the European Union (EU-15) we find that an increase in residential mortgage loans seems to improve bank's performance in terms of both profitability and credit risk in good market, pre-financial crisis, conditions. The results also show that credit risk and profitability are lower during the upturn in the residential property cycle.

Keywords: Residential property prices; Mortgage loans; Bank performance; Dynamic panel estimation (search for similar items in EconPapers)
JEL-codes: E44 G21 C33 (search for similar items in EconPapers)
Date: 2019
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