Improving the forecasts of European regional banks' profitability with machine learning algorithms

Ulrich Haskamp ()

No 705, Ruhr Economic Papers from RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen

Abstract: Regional banks as savings and cooperative banks are widespread in continental Europe. In the aftermath of the financial crisis, however, they had problems keeping their profitability which is an important quantitative indicator for the health of a bank and the banking sector overall. We use a large data set of bank-level balance sheet items and regional economic variables to forecast protability for about 2,000 regional banks. Machine learning algorithms are able to beat traditional estimators as ordinary least squares as well as autoregressive models in forecasting performance.

Keywords: profitability; regional banking; forecasting; machine learning (search for similar items in EconPapers)
JEL-codes: C53 C55 G21 (search for similar items in EconPapers)
Date: 2017
New Economics Papers: this item is included in nep-ban, nep-big and nep-for
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:rwirep:705

DOI: 10.4419/86788819

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