A profile of nontraditional agricultural real estate lender activity in the secondary market

PurposeThis paper uses novel data from a secondary market to assess how loans from nontraditional agricultural real estate lenders (NARELs) differ from traditional sources. Over $2 billion in loans from these entities were purchased by the secondary market between 2011 and 2020, but a lack of data has prevented a robust understanding of how these institutions operate.Design/methodology/approachThe authors review loans from nontraditional lenders through their lifecycle in the secondary market from application to purchase and performance.FindingsThis paper finds no observable differences between nontraditional and traditional volumes with regards to borrower credit characteristics, loan approval rates, interest margins and loan performance. It finds significant differences between loan volumes and variable rate product use.Originality/valueThis is the first paper to use internal lender data to review nontraditional agricultural real estate loans and is the first analysis of nontraditional agricultural volumes in the secondary market.

Analysis of Long-term Determinants of the Profitability for Amalgamated Bank of South Africa

Averting the risk of falling short on the expected profitability of a bank requires the knowledge of the underlying determinants. Knowledge of long-run underlying determinants of profitability assists banks in comprehensive planning. In this backdrop, the paper seeks to identify the long-term fundamental risk factors and their impacts on their profitability. The FM-OLS regression method is employed using annual data on the components of profitability as well as internal and external determinants of profitability of Amalgamated Bank of South Africa (ABSA) bank from 1998 to 2014. The study is particularly importance since bank-specific studies aimed at identifying long-run fundamental factors of profitability has not been given much attention in literature. Evidence from the study indicates that profitability of ABSA is cointegrated with its determinants. It is further observed that, with the exception of inflation and GDP, all the determinants have significant long-term impact on profitability. However, although size has significant impact on net interest margins, its impact on return on equity is insignificant. The results further suggest that capital and stock market capitalization pose risk to aggregate profitability of ABSA. It is therefore recommended that in future, ABSA should resort to optimal equity financing to maximize its expected profitability.

Financial sector transparency and bank interest margins: do quality of political and financial regulatory institutions matter?

Purpose This study aims to examine the effect of private (PRST) and public (PUST) sector-led financial sector transparencies on bank interest margins (BIM) termed as social cost of financial intermediation in different institutional quality setups. Design/methodology/approach This study uses a two-step dynamic generalized method of moments panel data and bootstrapped quantile models with 91 economies between 2004 and 2016. Data is sourced from World Development Indicator and Global Development Finance databases. Findings The results show that under strong and weak political and financial regulatory institutional setups, the reducing effect of PRST on BIM are observed and reported while the full sample reports no significant nexus between PRST and PUST on BIM. Furthermore, under political institutional quality sample, economies with strong corruption control and regulatory quality are able to reinforce the dampening effect of PRST on BIM while under the same political institutional quality sample, economies with weak rule of law are able to heighten the reducing effect of PRST on BIM. Moreover, under financial regulator institutional quality sample, economies with strong overall weighted and unweighted, chief executive officer and policy dependent central banks are able to intensify the diminishing effect of PRST on BIM while under the same financial regulator institutional quality sample, economies with weak limits on lending are able to amplify the reducing effect of PRST on BIM. However, PUST is reported to propel lower levels BIM in the bootstrap models, especially in strong institutional economies. Practical implications These findings imply that policymakers may rely on PRST to reduce BIM, especially under financial regulatory institutional quality. Additionally, economies must be careful on their reliance on PRST because the effectiveness of PRST to tame high BIM is dependent on the strength of political and financial regulatory institutions. Originality/value To the best of the authors’ knowledge, this study presents first time international evidence on the effect of private and public sector-led financial transparency on BIM in strong and weak political and financial regulatory institution economies.

Valuation of Banks in Bulgaria Using the DCF Method

The article presents a procedure for detailed deterministic modeling of bank valuation from the point of view of an outside observer, which is applied individually for First and Second Group banks in Bulgaria. The margin variables participating in the deterministic model, expressing the revenue and expenditure interest and non-interest margins, are combined in one generalized margin variable, and the volumes of balance sheets positions are represented by the value of bank-attracted resources. The results obtained from the application of the deterministic valuation model are compared with their book value, and for some of the smaller banks there are significant deviations between the valuation result and their book value.

Who Could We Blame? The Impact of Strategic Orientations on the Failure of Financial Institutions

We evaluate the impact of strategic orientation on the failure probability of financial institutions. Using the US credit union industry as the empirical setting, we find that credit unions which exhibit preferential treatment to borrowers are more likely to fail, whereas those who set operational strategies towards balancing the benefits between savers and borrowers experience a lower failure probability. The impacts appear to be more pronounced in small credit unions and in credit unions which have a lower operating experience. We also find that borrower-oriented credit unions generate lower interest margins while neutral behavior credit unions generate higher margins.

Diversification of Bank Profitability and Bankruptcy Risk in ASIA

This study aims to determine the bank interest margin and non-interest income in 25 countries in ASIA in the study period 1993 and 2020. This study uses the quantitative method Generalized Method of Moments (GMM). Prudence in developing the banking business by banking business actors is essential in preventing a systemic financial crisis in the future, such as the experience of the Asian financial crisis in 1997 and the subprime mortgage crisis in 2008. Bank interest margins and non-interest income are both required in maintaining bank cash inflow.

New paths in Austrian Macroeconomics

This paper makes four points. First, interest rates are not prices; rather they are metrics. Second, there are no markets for «loanable funds» in reality, so attempts to use «the» market for loanable funds either to explain saving-induced growth (or growth induced in other ways) are misleading. Rather, the appropriate concept is markets for financial assets. Third, the primary and most important source of growth is not households’ low or reduced time preferences, but entrepreneurs high or increased profit expectations. Fourth, financial institutions may respond, in part, to a rise in the monetary base by accepting a higher default risk of their assets; i.e., by making riskier loans and buying riskier (financial) assets, in order to maintain nominal interest rates and net interest margins. Key words: Risk, Loanable funds, Financial assets, Austrian business cycle theory. JEL Classification: E32. Resumen: Este artículo desarrolla una versión modificada de la teoría austriaca del ciclo económico en la que el papel protagonista lo juegan las expectativas de beneficio de los empresarios (más que la reducción de la preferencia temporal de los agentes económicos) y la asunción de proyectos empresariales más arriesgado, como principal detonante de las malas inversiones. Palabras clave: Riesgo, Fondos prestables, Activos financieros, Teoría austriaca del ciclo económico. Clasificación JEL: E32.

The Japanese Banks in the Lasting Low-, Zero- and Negative-Interest Rate Environment

The bursting of the Japanese bubble economy in the early 1990s put the stage for a lasting low-, zero-, and negative-interest rate environment, which fundamentally changed the business environment for the Japanese commercial banks. On the income side, with interest margins becoming increasingly depressed, net interest revenues declined, which forced the banks to expand revenues from fees and commissions. The banks had to cut costs by reducing the number of employees, closing branches and merging into larger banks. The gradual concentration process has most recently cumulated in the relaxation of the monopoly law. With the capital allocation function of banks being undermined, the Japanese economy has become zombified, suffering from anemic growth.