What Drives Bank Peformance?

Luca Guerrieri and James Collin Harkrader

No 2021-009, Finance and Economics Discussion Series from Board of Governors of the Federal Reserve System (U.S.)

Abstract: Focusing on some key metrics of bank performance, such as revenues and loan charge-off rates, we estimate the fraction of the observed variation in these metrics that can be attributed to changes in economic conditions. Macroeconomic factors can explain the preponderance of the fluctuations in charge-off rates. By contrast, bank-specific, idiosyncratic factors account for a sizable share of the variation in bank revenues. These results point to importance of bank-specific business models as a driver of performance.

Keywords: pre-provision net revenues; Backcasting; Banking factors; Charge-offs; Macroeconomic factors; Principal components (search for similar items in EconPapers)
JEL-codes: E30 G21 (search for similar items in EconPapers)
Pages: 11 p.
Date: 2021-02-16
New Economics Papers: this item is included in nep-ban, nep-fdg and nep-mac
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https://www.federalreserve.gov/econres/feds/files/2021009pap.pdf (application/pdf)

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Journal Article: What drives bank performance? (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedgfe:2021-09

DOI: 10.17016/FEDS.2021.009

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