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Bank profitability during recessions

Wilko Bolt (), Leo de Haan (), Marco Hoeberichts (), Maarten van Oordt () and Job Swank

Journal of Banking & Finance, 2012, vol. 36, issue 9, 2552-2564

Abstract: This paper contributes to the literature on the relation between bank profitability and economic activity. When allowing for stronger co-movement of bank profit with economic activity during deep recessions, we find a much larger impact of output growth on bank profitability than commonly found in the literature. Among the different components of bank profit, loan losses are the main driver of this result. We also find long-term interest rates in previous years to be important determinants of bank profit in times of high economic growth. Our findings are robust to the use of aggregate or individual bank data.

Keywords: Bank profitability; Business cycle; Loan losses; Recession (search for similar items in EconPapers)
JEL-codes: E32 G21 (search for similar items in EconPapers)
Date: 2012
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Working Paper: Bank Profitability during Recessions (2010) Downloads
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