scholarly journals Non-interest income and bank profitability: Evidence from Tunisian banks

2021 ◽  
Vol 9 (12) ◽  
pp. 2785-2796
Author(s):  
Ines Ghazouani ◽  
Nadia Basty
Keyword(s):  
Mixed Effects ◽  
Bank Profitability ◽  
Book Value ◽  
Interest Income ◽  
Banking Activity ◽  
Bank Managers ◽  
Personal Skills ◽  
The Impact ◽  
The Empirical Analysis ◽  
Macroeconomic Environment

This study investigates the impact of banks' diversified income structure on profitability among Tunisian banks during 2010-2018. We examine banks’ profitability using accounting and market measures as relevant indicators. We focus on each category of non-interest income separately rather than on non-interest income as an overall measure to provide a clearer analysis helping bank managers assess relevant strategies, and show that income structure diversification enhances banks’ profitability, albeit with their mixed effects. The empirical analysis of panel data indicates that Tunisian bank’s market-to-book value is very sensitive to all types of non-interest income. Banking activity diversification improves stock market profitability particularly in large banks and a safe macroeconomic environment. However, only fees and commissions incomes increase Tunisian banks’ assets profitability. Positive fees and commissions incomes’ effect is more pronounced for large banks and in a deflationary environment. We conclude by recommending to Tunisian banks, the diversification of their activities and the search for non-interest income while trying to control the costs of adopting these innovations, to take the necessary precautions, and to develop their personal skills.  

scholarly journals Effects of Income Diversification and Financial Performance of Kenyan Commercial Banks.

2021 ◽  
Vol 04 (08) ◽  
Author(s):  
Timothy Kipkogei Kiptum ◽  
Keyword(s):  
Financial Performance ◽  
Banking Sector ◽  
Income Diversification ◽  
Bank Profitability ◽  
Interest Income ◽  
Bank Managers ◽  
Effect Regression ◽  
Specific Factors ◽  
Motivating Factor ◽  
The Impact

This paper aims at examining the impact of income diversification on financial performance. The motivating factor is an occasion by raising pursuance of interest activities and fluctuations of profitability among banks due to the declining interest income and stiff competition. Design/methodology/approach – This study uses a sample of 31 Kenyan banks and data for the period 2008-2019. Data is analyzed through fixed-effect regression analysis. Findings – The study finds that income diversification improves bank profitability. The findings are attributable to an increase in non-interest income and possible risk diversification. Moreover, the study controls for several banking sector-specific factors that affect financial performance. The results show bank size, age, loan portfolio quality, lending strategy, and market share have a significant effect. Research implications – Based on the results, the study recommends that bank managers should consider engaging in non-traditional activities that generate non-interest income to compensate for deteriorating interest income and to boost performance. In addition, the study recommends that bank regulators should relax rules that limit the extent to which banks can engage in non-interest earning activities

scholarly journals IMPLICATIONS OF LOW INTEREST RATES ON BANK PROFITABILITY AND RISK-TAKING

2021 ◽  
pp. 1-27
Author(s):  
MANUELA ENDER ◽  
CORINNA NEUHOFER
Keyword(s):  
Interest Rates ◽  
Risk Taking ◽  
Qualitative Content Analysis ◽  
Negative Influence ◽  
Mitigation Strategies ◽  
Bank Profitability ◽  
Interest Income ◽  
Low Interest Rates ◽  
State Of Research ◽  
The Impact

This paper investigates the effect of low interest rates on bank profitability and risk-taking. A comprehensive depiction of the current state of research was developed based on systematic literature review and qualitative content analysis. A low interest rate environment, as present in many economies, has various implications on bank profitability and risk-taking. A positive relationship is found between interest rates and net interest income, while the relationship with non-interest income is negative. Also, banks increase risk-taking in search for yield. The influence on bank profitability is highly dependent on several factors, but in most papers a negative influence is found. Throughout the world banks have managed to limit the impact through mitigation strategies, such as diversification, which are presented as guidance.

scholarly journals Determinants of the performance of Moroccan banks

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Abdelkader Derbali
Keyword(s):  
Banking System ◽  
Bottom Line ◽  
Bank Profitability ◽  
Macroeconomic Factors ◽  
Content Type ◽  
Economy Of Scale ◽  
Effect Model ◽  
Bank Managers ◽  
Banking Networks ◽  
The Impact

PurposeThe economic and financial literature dealing with the subject of bank profitability has often been based in the measurement of banking results on three main indicators: ROA, ROE and MIN. This article aims to determine and analyze the different determinants that influence bank profitability and to identify the impact of these determinants on the profitability of Moroccan banks.Design/methodology/approachFor this purpose, a fixed individual effect model was adopted for the case of six Moroccan banks during the period of study from 1997 to 2018. The authors carried out their estimates at three levels according to three categories of profitability factors: bank factors, factors of the banking system and macroeconomic factors.FindingsThe empirical findings show that Moroccan banks react on their size to boost their performance, which further explains the continued expansion of Moroccan banking networks. The authors confirm that Moroccan banks have not yet reached a level of size that will be detrimental to their performance. Therefore, the authors can conclude that the big Moroccan banks do not follow the concept of economy of scale. The effects of the variation in the level of economic growth as well as the evolution of the level of inflation on the performance of Moroccan banks are not significant.Originality/valueThe authors’ findings and results have some important originality and value. Primarily, these results would consist of better helping the State, bankers, and bank managers to better understand the various determinants of bank profitability. The results may also help to better examine the effect of each factor, whether internal or external, on banks' bottom line.

The interrelationship between net interest margin and non-interest income: evidence from Vietnam

2017 ◽  
Vol 13 (5) ◽  
pp. 521-540 ◽  
Author(s):  
Tu DQ Le
Keyword(s):  
Negative Impact ◽  
Rank Order ◽  
Banking System ◽  
Policy Makers ◽  
Content Type ◽  
Interest Income ◽  
Net Interest Margin ◽  
Bank Managers ◽  
The Impact ◽  
Interest Margin

Purpose The purpose of this paper is to investigate the interrelationship between non-interest income (NII) and net interest margin (NIM) in the Vietnamese banking system between 2006 and 2015. Thereafter, the impact of NII on risk-adjusted returns is also examined. Design/methodology/approach Various analysis techniques are used to achieve the research objectives. Findings The findings show a negative two-way link between NII and NIM, thus supporting the subsidisation hypothesis. Furthermore, NII is found to have a negative impact on risk-adjusted returns. When observing this relationship in sub-samples, the findings indicate that the negative impact of NII on risk-adjusted returns still holds in the first subsample (2006-2011). The coefficient of NII becomes positive but not significant for the subsequent period (2012-2015). In addition, the Spearman rank-order correlations of returns on assets and NII for both sub-samples are negative. Together, the author concludes that there are no diversification benefits in the Vietnamese banking system. Practical implications The evidence suggests a trade-off between non-interest activities and traditional lending ones. In addition, the findings demonstrate that the Vietnamese banks may use NIIs to expand leverage and herd by coordinating NII strategy during the economic downturns. Thus, the banking system may be exposed to a greater risk. The research has implications for bank supervisors, policy-makers and bank managers. Originality/value This study is the first attempt to investigate the interrelationships between net NII and NIM in the Vietnamese banking system.

scholarly journals The Impact of Monetary Policy on Bank Profitability and the Moderating Role of Funding Patterns in Vietnam

2022 ◽  
Vol 14 (1) ◽  
pp. 109-134
Author(s):  
Van Dan Dang
Keyword(s):  
Monetary Policy ◽  
Monetary Shocks ◽  
Policy Tools ◽  
Bank Profitability ◽  
Positive Effects ◽  
Interest Income ◽  
The Impact ◽  
Moderating Role ◽  
Bank Profits

The study investigates the effect of monetary policy on bank profitability while also taking into account the moderating role of bank funding patterns. Uniquely, the study focuses on disaggregate components of bank profits in an environment containing various monetary policy tools. Using a dataset of commercial banks in Vietnam, the results show that monetary policy drives bank profitability asymmetrically. Concretely, interest rates (i.e., lending rates and policy rates) exert positive effects on net interest income, but negative impacts on non-interest income. For quantitative-based policy tools, including the central bank’s security purchases and foreign exchange reserves, monetary policy is positively correlated with non-interest income but negatively associated with net interest income. The reaction of banks’ net interest income to monetary policy adjustments is translated into overall bank profits. Further analysis indicates that the monetary policy/bank profitability nexus across different proxies is less pronounced at banks with more diversified funding patterns. This finding sheds light on prior arguments attributing financially weaker banks’ greater sensitivity in facing monetary shocks to the limited alternative funding.

scholarly journals Impact of financial development on bank profitability

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Peterson K. Ozili ◽  
Honour Ndah
Keyword(s):  
Financial Development ◽  
Banking Sector ◽  
Generalized Method Of Moments ◽  
Negative Relationship ◽  
Financial System ◽  
Bank Profitability ◽  
Content Type ◽  
Interest Income ◽  
The Impact ◽  
Asset Managers

PurposeThis paper investigates the effect of financial development on bank profitability. The authors examine whether financial development is an important determinant of bank profitability.Design/methodology/approachThe ordinary least square and the generalized method of moments regression methods were used to analyze the impact of financial development on the profitability of the Nigerian banking sector.FindingsThe authors find a significant negative relationship between the financial system deposits to GDP ratio and the non-interest income of Nigerian banks. This indicates that higher financial system deposits to GDP depresses the non-interest income of Nigerian banks. The result implies that the larger the size of the Nigerian financial system, the lower the profitability of banks in Nigeria. Also, the authors observe that bank concentration, nonperforming loans, cost efficiency and the level of inflation are significant determinants of the profitability of Nigerian banks.Practical implicationsIt is recommended that regulators should establish market-enabling policies that encourage new banks to emerge in the banking industry. The entry of new banks can lead to increase in financial system deposits and credit supply for economic growth. Regulators also need to understand the role of Nigerian banks in promoting financial development and find ways to collaborate with banks towards financial sector development. Another implication of the findings for asset managers is that asset managers will need to take into account the prevailing level of financial development, particularly the size of the financial system, in their asset pricing and investment decisions. This will ensure that investors get value for their investments in Nigeria. The financial implication of the study is that the level of financial development in Nigeria can improve the finance-growth linkages in Nigeria through the efficient allocation of credit and capital to crucial sectors of the Nigerian economy to spur growth in those sectors.Originality/valueEvidence dealing with how financial development affects the profitability of the banking sector in African countries is scarce in the literature, and is completely absent for Nigeria. This paper addresses this research gap.

Internal Determinants Of Bank Profitability In South Africa: Does Bank Efficiency Matter?

2014 ◽  
Vol 13 (5) ◽  
pp. 1033 ◽  
Author(s):  
Andrew Maredza
Keyword(s):  
Total Factor Productivity ◽  
Fixed Effects ◽  
Capital Adequacy ◽  
Fixed Effects Model ◽  
Factor Productivity ◽  
Positive Role ◽  
Bank Efficiency ◽  
Bank Profitability ◽  
Interest Income ◽  
The Impact

In a study conducted by Ncube (2009) to evaluate bank cost and profit efficiency, it was established that South African banks were more efficient at managing costs than generating profits. In this paper, the aim is to complement this particular work by exploring the internal determinants of bank profitability but with more focus on the impact of bank efficiency. Applying a two step-methodology framework to a panel of four small banks and four large banks for the period 2005-2011, total factor productivity efficiency (TFPE) scores were generated using the DEA methodology. Within the first stage, the intermediation approach was followed in which bank inputs included total operating expenses, labour, fixed assets, and total deposits while interest income, non-interest income and gross loans were considered as output variables. Each bank`s efficiency score for each of the periods was then evaluated based on its distance from the constructed efficiency frontier. In the second stage analysis, the Generalised Least Squares Fixed Effects Model was then performed to examine the impact of TFPE among other internal determinant factors on bank profitability indicators, specifically return on average assets (ROAA) and net interest margin (NIM). The obtained empirical findings showed that high total factor productivity efficiency and capital adequacy lead to higher profitability, while high cost inefficiency, diversification activities, large bank size, and high credit risk leads to lower profitability. Of great importance was that both models confirmed the positive role of attaining efficiency as an important driver of profitability among banks.

scholarly journals How does liquidity influence bank profitability? A panel data approach

Accounting ◽  
2021 ◽  
pp. 59-64 ◽  
Author(s):  
Thu-Trang Thi Doan ◽  
Toan Ngoc Bui
Keyword(s):  
Economic Growth ◽  
Panel Data ◽  
Commercial Banks ◽  
Return On Assets ◽  
Bank Profitability ◽  
Liquid Asset ◽  
Gmm Estimation ◽  
Macroeconomic Control ◽  
Bank Managers ◽  
The Impact

This study investigates the impact of liquidity on bank profitability. Particularly, bank profitability is measured by return on assets (ROA) while liquid assets to total assets (LATA) and total loans to total deposits (TLTD) are indicators of bank liquidity. A panel data of 26 Vietnamese commercial banks are obtained over the period 2013-2018. The GMM estimation is adopted to test the significant effect of liquidity on profitability of Vietnamese commercial banks. The results reveal that profitability (ROA) was negatively influenced by liquid asset ratio (LATA) and positively correlated to loan-to-deposit ratio (TLTD). Further, bank profitability was also affected by macroeconomic control variables like economic growth (EG) and inflation (INF). The results are not only essential for bank managers but also provide scholars a valuable reference.

ICT SMEs, Performance, Absorptive Capacity and Transformative Capacity

2019 ◽  
Vol 118 (3) ◽  
pp. 178-188
Author(s):  
Yeon-Sung Cho ◽  
Kyung-Il Khoe
Keyword(s):  
Firm Performance ◽  
Market Orientation ◽  
Empirical Analysis ◽  
Absorptive Capacity ◽  
Latent Variables ◽  
Equation Modeling ◽  
Transformative Capacity ◽  
The Impact ◽  
The Empirical Analysis ◽  
Innovative Capacity

This study intends to integrate the relationship of market orientation, innovative capacity and firm performance to Information and Communication Technology(ICT) SMEs. The purpose of this study is to identify the role of absorptive capacity and transformative capacity that affect the performance of ICT SMEs. Hypotheses were established between five latent variables. A total of six hypotheses were established including the moderated effects of absorptive capacity and transformative capacity. Of the data collected after the survey, 112 valid surveys were selected as the final sample, except for 17 questionnaires with high non - response and insincere response. The empirical analysis of this study used smartpls3.0, Partial Least Squares (PLS), a variance-based structural equation modeling. The empirical analysis of this study revealed that the impact of market orientation on innovative capacity was significant. Moreover, the innovative capacity had a positive effect on the performance of ICT SMEs. In addition, the absorptive activity had a positive moderated effect between the market orientation and the innovative capacity. On the other hand, the transformative capacity showed a positive moderated effect in relation to innovative capacity and firm performance. Our empirical results have demonstrated the importance of knowledge based capacity in the ICT SMEs.

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