Deposit-lending synergies and bank profitability

Bruno R. Arthur () and Monika K. Rabarison ()
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Bruno R. Arthur: The University of Texas Rio Grande Valley
Monika K. Rabarison: The University of Texas Rio Grande Valley

Journal of Economics and Finance, 2018, vol. 42, issue 4, No 4, 710-726

Abstract: Abstract Banks accept deposits and often lend via commitments. It has been shown that there are synergies between transaction deposits and loan commitments; and that the volatility of bank stock returns declines when these two liquidity risks are taken together. We examine whether such deposit-lending synergies reflect on U.S. commercial bank profitability levels, and whether the synergies impact bank profitability levels differently around financial crises. Our results from panel regressions show that the deposit-lending synergies translate to increased profitability only for small publicly traded banks. However, pre-crisis deposit-lending synergies do not appear to lead to higher profitability during or after the crises.

Keywords: Bank profitability; Deposits; Loan commitments; Financial crises (search for similar items in EconPapers)
JEL-codes: G01 G20 G21 (search for similar items in EconPapers)
Date: 2018
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DOI: 10.1007/s12197-017-9414-x

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