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What happened to profitability? Shocks, challenges and perspectives for euro area banks

Gong Cheng () and Dirk Mevis ()

MPRA Paper from University Library of Munich, Germany

Abstract: This paper uses a newly constructed dataset including financial statement information of 311 banks in the euro area to analyse the evolution of bank profitability before and after the Global Financial Crisis and the subsequent European crisis. We first document the general trends in the changes in banks' profitability with a particular focus on country and bank heterogeneity. We find that the profitability of banks in different parts of the monetary union was hit by multiple shocks of different nature. Based on this, we then propose an econometric analysis of the drivers behind the evolution of bank profitability by discriminating factors relative to macroeconomic conditions, bank funding and portfolio structures, and new banking regulations in the euro area.

Keywords: bank; profit; return on asset; bank regulation; bank business model (search for similar items in EconPapers)
JEL-codes: G21 G28 G33 L25 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ban, nep-cfn and nep-eec
Date: 2015-08-17
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:66150

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