Income structure, profitability and risk in the European banking sector: The impact of the crisis

Joaquin Maudos ()

Research in International Business and Finance, 2017, vol. 39, issue PA, 85-101

Abstract: This study sets out to analyse whether the effect of the income structure on the risk and profitability of European banks has changed as a result of the crisis and if it varies according to banks’ specialisation in a particular type of banking business. To do so, it estimates the income structure over the period 2002–2012 using data for a panel of European banks. The study also examines if there are differences between investment-oriented banks and banks specialising in financial intermediation in terms of the effect of income structure on risk and profitability. Our findings show that an increase in the share of non-interest income has a negative impact on profitability, although the effect was only significant during the crisis. Nevertheless, analysing the impact on each type of banking business separately, the effect on retail banks is negative and significant, but not significant in the case of banks whose business is more diversified. An increase in the share of non-interest income was found to increase risk, although the effect diminished with the crisis. In general, the results suggest that market power has beneficial effects on financial stability.

Keywords: Income structure; Profitability; Risk; European banks (search for similar items in EconPapers)
JEL-codes: G21 (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (35)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0275531916301908
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:riibaf:v:39:y:2017:i:pa:p:85-101

DOI: 10.1016/j.ribaf.2016.07.034

Access Statistics for this article

Research in International Business and Finance is currently edited by T. Lagoarde Segot

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