Breaking the Bank? A Probabilistic Assessment of Euro Area Bank Profitability / Selim Elekdag, Sheheryar Malik, Srobona Mitra.

Format:

Book

Government document

Author/Creator:

Elekdag, Selim.

Contributor:

Malik, Sheheryar.

Mitra, Srobona.

Series:

IMF Working Papers; Working Paper ; No. 2019/254

IMF Working Papers

Language:

English

Subjects (All):

Eurozone.

Bank profits.

Europe.

Physical Description:

1 online resource (39 pages)

Edition:

1st ed.

Place of Publication:

Washington, D.C. : International Monetary Fund, 2019.

Summary:

This paper explores the determinants of profitability across large euro area banks using a novel approach based on conditional profitability distributions. Real GDP growth and the NPL ratio are shown to be the most reliable determinants of bank profitability. However, the estimated conditional distributions reveal that, while higher growth would raise profits on average, a large swath of banks would most likely continue to struggle even amid a strong economic recovery. Therefore, for some banks, a determined reduction in NPLs combined with cost efficiency improvements and customized changes to their business models appears to be the most promising strategy for durably raising profitability.

Contents:

Cover

Contents

Abstract

I.Introduction

II. Conceptual and Empirical Framework

A. Conceptual Framework

B. Econometric Approach

C. Conditional Profitability Distributions

III. Data, Key Trends, and Stylized Facts

A. Data

B. Key Trends and Stylized Facts

IV. Econometric Analysis

A. Benchmark OLS Regression Analysis

B. Robustness Analysis

C. Quantile Regression Analysis

V. Conditional Profitability Distributions

VI. Conclusions and Policy Implications

References

FIGURES

1. Euro Area Banks (Significant Institutions): Key Trends and Stylized Facts

2. Illustrative Conditional Profitability (ROE) Distributions

TABLES

1. Euro Area Bank Sample

2. Descriptive Statistics of Main Variables

3. Stylized Facts: Key Bank-Specific Determinants

4. Baseline Profitability Regressions: Return on Assets and Components

5. Robustness Analysis: Return on Assets

6. Return on Equity Regressions

7. Robustness Analysis: Risk-Adjusted Profitability Measures

8. Quantile Regressions: Return on Assets

9. Quantile Regressions: Return on Equity

11. Summary: Conditional Profitability (ROE) Distributions.

Notes:

Description based on publisher supplied metadata and other sources.

ISBN:

9781513522258

1513522256

9781513522265

1513522264

OCLC:

1132288445