Download or read book The Impact of Income Sources Diversification on Bank Performance written by Mudesir Kasim and published by GRIN Verlag. This book was released on 2020-02-21 with total page 62 pages. Available in PDF, EPUB and Kindle. Book excerpt: Master's Thesis from the year 2016 in the subject Business economics - Banking, Stock Exchanges, Insurance, Accounting, grade: 3.5, , language: English, abstract: The general objective of this study is to investigate the impact of income source diversification on financial performance of commercial banks in Ethiopia. Commercial banks in Ethiopia are currently facing competition from non-bank institutions entry into the activities which was in the past only role of banks. Therefore, banks started searching new income sources rather than focusing only traditional inter-mediation income generating activities. Thus, this study was to examine the impact of income sources diversification on bank performance in case of some selected commercial banks in Ethiopia by using panel data over the period 2010-2015. The study used secondary data collected mainly from each sampled banks annual report financial statements. Since the data is secondary in nature, quantitative approach was adopted. This data was analyzed by using STATA version 12 and Microsoft Excel. Fixed effect model was used, since this model is preferred than the random effect model based on the hausman specification test. Return on asset (ROA) was used as dependent variable while income diversification (Div) as independent variable with control variables such as bank size (BS) in terms of total assets, equity/ assets ratio (EAR), loan/asset ratio (LAR) and expense/income ratio (Exp). The findings of the study show that the level of diversification has a positive impact on financial performance of Ethiopian commercial banks. In addition, the study also revealed that EAR, LAR and BS had positive impact on financial performance while Exp had negative impact. The results of the study are important for bankers to understand how income diversification affects the performance of banks. Therefore, the study recommended that banks should diversify their sources of income into interest and non-interest as well as reduce operating expense in effective way, so as to enhance their performance (ROA).

Download or read book Australian Specific Bank Features and the Impact of Income Diversification on Bank Performance and Risk written by Piyadasa Edirisuriya and published by . This book was released on 2014 with total page 45 pages. Available in PDF, EPUB and Kindle. Book excerpt: As an outcome of financial deregulation, commercial banks have significantly diversified from a domestic dependence on simple interest-bearing loans to a broader range of financial services across international markets. Such initiatives have transformed the structure of the Australian banking industry and are destined to receive scrutiny following the announcement of Australia's financial services inquiry. Against the view that attempts by firms to diversify can be expected to impact negatively on financial performance, we find no evidence to suggest that diversification has been detrimental to the performance of Australian banks. It appears, rather, that Australia's banks have improved their risk-return revenue streams as an outcome of diversification. We confirm our findings with both accounting and market measures of performance.

Download or read book Bank Diversification in India written by Dr. Somnath Vibhute and published by Blue Rose Publishers. This book was released on 2023-10-11 with total page 232 pages. Available in PDF, EPUB and Kindle. Book excerpt: Bank Diversification in India is an in-depth analysis of business diversification of commercial banks in India during the last three decades. The concept of diversification is explained in a lucid way. The book explains the strength of bank diversification and its comparison among different Bank groups in India. Furthermore, it analyses the changing income patterns and profitability of various bank groups in recent years. The book ends with reflecting on the contemporary phase of computerization and digitization of banking products thereby impacting the income-earning and profit-making capacity of commercial banks. It further suggests a number of ways and means which can be adopted by bankers in order to enhance the income streams and profitability in the era of modern banking.

Download or read book Income Diversification in the Chinese Banking Industry Challenges and Opportunities written by Zhixian Qu and published by Springer Nature. This book was released on 2020-05-26 with total page 177 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book provides an overview of the historical financial reforms and regulatory changes in China, highlighting the background to and causes of changes in the income structure of China's banks. It also investigates ongoing concerns with regard to banking diversification in China, and its consequences, amid the global trend of banks’ shift to non-traditional businesses. Focusing on three critical aspects of bank-income diversification, namely the effects on profitability, risk level, and efficiency, it employs the concept of systemically important banks, which describes the scale and degree of influence a bank has in global and domestic financial markets. More importantly, rather than replicating techniques employed in the research on developed markets, it applies several improved methodologies to address bank diversification in the specific context created by China’s unique institutional background and data characteristics, such as GMM-type threshold models and stochastic frontier analysis with the within maximum likelihood estimation. Shedding new light on the current status of income diversification in the Chinese banking sector, this book is a valuable resource for readers in fields such as banking and financial stability. It will also help banking professionals and financial regulatory authorities to better understand the reform of China's financial industry and the future direction of banking.

Download or read book Income Diversification and Performance of Islamic Banks written by Hsien Chang John Yip and published by . This book was released on 2012 with total page 379 pages. Available in PDF, EPUB and Kindle. Book excerpt: This thesis investigates the effect of income diversification on the performance of Islamic banks in Malaysia, Saudi Arabia, Kuwait, United Arab Emirates, Bahrain and Qatar where they operate alongside conventional banks in a dual banking system. Accounting data was drawn from 68 conventional and 42 Islamic banks from 1997 to 2009. The main focus was to see whether a greater reliance on non-financing income impacts on earnings quality and if so, how this may vary between Islamic and conventional banks. Commission and fee income, trading income and other non-financing income constitute non-financing income. For conventional banks, this is known as non-interest income, but in Islamic banking the payment and receipt of interest is prohibited so this 'other income' is referred to as non-financing income (that is, income unrelated to deposit-taking and loan granting). Islamic banks operate as universal banks and offer retail and wholesale financing plus investment banking services. Using various empirical approaches, we find that non-financing income positively influences banks' risk-adjusted performance on a net overall impact basis, after taking into account, the consequential indirect impact arising from changes in income diversification (provided that the increase in non-financing income is carried out up until the optimal share of non-financing income of 0.5). Greater income diversification on its own, increases income volatility and this negatively impacts bank's risk-adjusted performance, more so, when income diversification exceeds the optimal score of 0.5. Islamic banks are found to be more focused on deposit/loan financing and less diversified in terms of non-financing income activities compared to conventional banks. We find that Islamic banks appear to be less susceptible to earnings volatility given their lower diversified income source. Islamic banks have lower profitability (on average) on a risk-adjusted basis when compared to their conventional counterparts.

Download or read book Income Stream Diversification and Financial Performance of Commercial Banks in Kenya written by Stephen Githaiga Ngware and published by . This book was released on 2020 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: Banks have resulted in strengthening their portfolio mix by diversifying their portfolios in order to eliminate risks, increase their revenue sources, remain profitable and survive the competitive environment. Diversification being the main challenge encountered by banks aims at minimizing the variability of operations by banks by reducing the concentration of deposits, loans and revenue that is generated from these activities. Income diversification aims at increasing the sources of interest as well as non- interest income, reduce interest rate risk and total unsystematic risk. Capping of rates of interest has been judged to be a threat to performance of the banking institutions in Kenya and thus a need for commercial banking institutions to strengthen by diversification their streams of income. The 43 commercial banking institutions having official license from CBK by December 2017 were the target population of this study. The study analyzed Time Series Cross Sectional unbalanced secondary panel data obtained from KNBS, World Bank website, CBK, published financial accounts statements of all the 43 commercial banking institutions in Kenya, and the Banking survey publications for fifteen years ranging from 2002 to 2017. Four hypotheses were estimated using techniques of Panel data by adoption of fixed effects and random effects. Generalized Method of Moments (GMM) was used to estimate short run model. Income streams diversification had an association that was significantly positive on financial performance of commercial banking institutions in Kenya.

Download or read book Foreign Banks written by Mr.Stijn Claessens and published by International Monetary Fund. This book was released on 2012-01-01 with total page 40 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper introduces a comprehensive database on bank ownership for 137 countries over 1995-2009, and reviews foreign bank behavior and impact. It documents substantial increases in foreign bank presence, with many more home and host countries. Current market shares of foreign banks average 20 percent in OECD countries and 50 percent elsewhere. Foreign banks have higher capital and more liquidity, but lower profitability than domestic banks do. Only in developing countries is foreign bank presence negatively related with domestic credit creation. During the global crisis foreign banks reduced credit more compared to domestic banks, except when they dominated the host banking systems.

Download or read book The Effect of Income Diversification on Bank Risk written by Tu Le and published by . This book was released on 2017 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This study examines the effect of income diversification on bank risk in Vietnam between 2006 and 2014, when there were significant changes in banks' income structure by using both the accounting based risk and insolvency risk measures. The rolling average approach is first used to construct the variables. Thereafter, fixed effects and ordinary least square estimations are used to examine the relationship between income diversification and bank risk.The findings indicate that diversification towards non-traditional activities tends to increase bank risk regardless of bank sizes. This somewhat conflicts with the conventional view of diversification strategy that a shift towards fee-based income sources is expected to reduce bank risk. The results of robustness checks also confirm the main findings. In addition, the findings demonstrate that a reduction in the bank's overall risk is mainly attributed to a significant decrease in the interest income risk. Consequently, Vietnamese banks should focus on controlling risk that is associated with traditional lending activities rather than pursuing diversification strategy in order to mitigate their operating risk.

Download or read book The Effect of Revenue Diversification on Bank Profitability and Stability During the COVID 19 Pandemic written by Rogers Ondiba Ochenge and published by . This book was released on 2022 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper uses annual data from Kenyan banks over the 2010-2020 period to empirically analyze the link between diversification (non-interest income) and bank performance. Using dynamic panel regressions, the study finds that banks which diversify (functionally) their sources of revenues tend to be more profitable and financially stable. Importantly, the study finds that reliance on non-interest revenue sources acts as an economically important shock absorber in times of declining profits such as witnessed in the ongoing COVID-19 pandemic. From a policy perspective, these results encourage banks to leverage on new technologies to create non-traditional products whose operating marginal costs are small. This also calls for regulators to remain open to such innovations.

Download or read book The Oxford Handbook of Banking written by Allen N. Berger and published by Oxford University Press. This book was released on 2010 with total page 1033 pages. Available in PDF, EPUB and Kindle. Book excerpt: This handbook provides an overview and analysis of state-of-the-art research in banking written by researchers in the field. It includes abstract theory, empirical analysis, and practitioner and policy-related material.

Download or read book Bank Performance written by Jacob Bikker and published by Routledge. This book was released on 2008-10-27 with total page 173 pages. Available in PDF, EPUB and Kindle. Book excerpt: Economic literature pays a great deal of attention to the performance of banks, expressed in terms of competition, concentration, efficiency, productivity and profitability. This book provides an all-embracing framework for the various existing theories in this area and illustrates these theories with practical applications. Evaluating a broad field of research, the book describes a profit maximizing bank and demonstrates how several widely-used models can be fitted into this framework. The authors also present an overview of the current major trends in banking and relate them to the assumptions of each model, thereby shedding light on the relevance, timeliness and shelf life of the various models. The results include a set of recommendations for a future research agenda. Offering a comprehensive analysis of bank performance, this book is useful for all of those undertaking research, or are interested, in areas such as banking, competition, supervision, monetary policy and financial stability.

Download or read book Contemporary Issues in Banking written by Myriam García-Olalla and published by Springer. This book was released on 2018-07-23 with total page 470 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book offers insights into the contemporary issues in banking with a special focus on the recent European regulatory reforms, governance and the performance of firms. Written by prestigious professors and expert academics in the field, the book also covers a diverse set of topics that have gained great importance in this sector such as firm financing, culture, risk and other challenges faced by banks. The book is of interest to scholars, students and professionals in banking.

Download or read book The Impact of Diversification on Bank Holding Company Performance written by Chinpiao Liu and published by . This book was released on 2009 with total page 364 pages. Available in PDF, EPUB and Kindle. Book excerpt: Bank holding companies (BHCs) are hypothesized to achieve potential portfolio and synergistic benefits through various forms of diversification. On the other hand, diversification can generate new managerial problems or agency costs. This dissertation examines five issues. 1) Do all the various forms of diversification have the same favorable/unfavorable effects on BHCs' performance?, 2) Are there any interaction effects among the various types of diversification?, 3) Since the business strategies of large BHCs are different from those of small BHCs, do the diversification effects vary by size?, 4) How did diversification impact BHC performance during the 2007-2008 financial crisis?, and 5) What types of diversification-associated Merger and Acquisitio should BHCs employ to take advantages of diversification benefits? Overall Results - The study finds that not all forms of diversifications have the same impacts on BHCs' performance. Some types of diversification support the hypothesis of favorable portfolio benefits and cost synergies, while other findings support the hypothesis of unfavorable agency costs. Non-interest-income diversification has the strongest favorable impacts on BHCs' performance as it both increases returns and reduces portfolio risk. Security diversification has unfavorable impacts on accounting returns but favorable impacts on market returns. Off-balance-sheet diversification has unfavorable impacts on risk and it does not contribute to BHCs' returns. The largest unfavorable impact is on derivatives losses. Moreover, for some diversification measures, the impacts depend on the scale of their associated activities. When the scale of the diversified activity is large enough, the net diversification impact may change its sign. In general, among the various diversified activities where the sign of the impacts switch with scales, loan diversification switches direction from favorable to unfavorable. BHCs might tend to make increasingly risky loans when their scale of loans expands. Moreover, agency problems might also become difficult to control. On the other hand, security diversification tends to switch the direction of impact from unfavorable to favorable. With larger security portfolios, BHCs are more capable of reducing risk and increasing returns with a wide selection of securities. Results for Various Size Banks - For small banks, larger community banks, and regional BHCs, non-interest-income and loan diversifications generally enhance performance while security portfolio and off-balance sheet diversifications reduce performance. For very large money center banks, diversification into off-balance-sheet activities generates the strongest performance benefit, while domestic geographic, loan and non-interest income diversifications also have favorable impacts. On the other hand, security portfolio diversification has a mix of both favorable and unfavorable effects. Focusing on BHCs with international loan portfolios, off-balance-sheet diversification creates the strongest performance benefits, followed by domestic geographic diversification. On the other hand, international geographic and loan diversifications, along with security portfolio and non-interest income diversifications reduce bank performance. Over all, it appears that larger banks (with the exception of international banks) achieve more favorable diversification benefits. On the other hand, the interaction effects of various forms of diversifications appear to benefit small BHCs the most. Smaller BHCs may not benefit through single channel diversification because doing so likely increases operating costs while the bank remains unable to fulfill their target customers' full range of service needs. However, by multi-channel diversification, the interaction benefits of diversifications can be achieved. On the other hand, larger BHCs can benefit through single channel diversification because they have more market power and are able to enjoy the benefits of diversified portfolios and cost synergies generated through economies of scale. However, multi-channel diversification may make larger BHCs more difficult to manage. For example, they might engage in unfamiliar and risky business where operating and agency costs offset potential portfolio benefits. Overall, diversification generally supports the hypothesis of favorable portfolio benefits and cost synergies. Furthermore, diversification has a consistently more favorable impact during the recent financial crisis. In general, BHCs with widely diversified activities will suffer less than other BHCs with concentrated activities when financial crisis occurs. Impact of Merger Activity - The study also finds that Merger and Acquisition activity associated with several forms of diversification improve BHC performance, while the other forms of diversification have insignificant impacts on performance. The overall implications for BHCs are that not all diversification-driven mergers generate benefits for BHCs. Hence, BHCs should choose the right mergers which meet their business goals.

Download or read book Determinants of Commercial Bank Interest Margins and Profitability written by Asl? Demirgüç-Kunt and published by World Bank Publications. This book was released on 1998 with total page 52 pages. Available in PDF, EPUB and Kindle. Book excerpt: March 1998 Differences in interest margins reflect differences in bank characteristics, macroeconomic conditions, existing financial structure and taxation, regulation, and other institutional factors. Using bank data for 80 countries for 1988-95, Demirgüç-Kunt and Huizinga show that differences in interest margins and bank profitability reflect various determinants: * Bank characteristics. * Macroeconomic conditions. * Explicit and implicit bank taxes. * Regulation of deposit insurance. * General financial structure. * Several underlying legal and institutional indicators. Controlling for differences in bank activity, leverage, and the macroeconomic environment, they find (among other things) that: * Banks in countries with a more competitive banking sector-where banking assets constitute a larger share of GDP-have smaller margins and are less profitable. The bank concentration ratio also affects bank profitability; larger banks tend to have higher margins. * Well-capitalized banks have higher net interest margins and are more profitable. This is consistent with the fact that banks with higher capital ratios have a lower cost of funding because of lower prospective bankruptcy costs. * Differences in a bank's activity mix affect spread and profitability. Banks with relatively high noninterest-earning assets are less profitable. Also, banks that rely largely on deposits for their funding are less profitable, as deposits require more branching and other expenses. Similarly, variations in overhead and other operating costs are reflected in variations in bank interest margins, as banks pass their operating costs (including the corporate tax burden) on to their depositors and lenders. * In developing countries foreign banks have greater margins and profits than domestic banks. In industrial countries, the opposite is true. * Macroeconomic factors also explain variation in interest margins. Inflation is associated with higher realized interest margins and greater profitability. Inflation brings higher costs-more transactions and generally more extensive branch networks-and also more income from bank float. Bank income increases more with inflation than bank costs do. * There is evidence that the corporate tax burden is fully passed on to bank customers in poor and rich countries alike. * Legal and institutional differences matter. Indicators of better contract enforcement, efficiency in the legal system, and lack of corruption are associated with lower realized interest margins and lower profitability. This paper-a product of the Development Research Group-is part of a larger effort in the group to study bank efficiency.

Download or read book The Belt and Road Strategy in International Business and Administration written by Liu, Wei and published by IGI Global. This book was released on 2019-04-12 with total page 273 pages. Available in PDF, EPUB and Kindle. Book excerpt: International business strategies orbit around the idea of strengthening partnerships with other countries. Developing new and innovative opportunities to connect neighboring countries bodes well for those countries and the entire world. The Belt and Road Strategy intends to do just that by strengthening partnerships and constructing a comprehensive and multilevel interconnected network to achieve pluralistic, independent, balanced, and sustainable development. The Belt and Road Strategy in International Business and Administration is a vital collection of information that discusses one of most important programs embodying economic, regional, and political demands in the Asian and European environment. Featuring research on topics such as business development, business law, and multinational enterprise, this book is ideally designed for government officials, professionals, researchers, students, and professors seeking coverage on the theoretical and practical contributions of international business.

Download or read book Income Diversification in the German Banking Industry written by Ramona Busch and published by . This book was released on 2009 with total page 33 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Bank Profitability and Financial Stability written by Ms.TengTeng Xu and published by International Monetary Fund. This book was released on 2019-01-11 with total page 54 pages. Available in PDF, EPUB and Kindle. Book excerpt: We analyze how bank profitability impacts financial stability from both theoretical and empirical perspectives. We first develop a theoretical model of the relationship between bank profitability and financial stability by exploring the role of non-interest income and retail-oriented business models. We then conduct panel regression analysis to examine the empirical determinants of bank risks and profitability, and how the level and the source of bank profitability affect risks for 431 publicly traded banks (U.S., advanced Europe, and GSIBs) from 2004 to 2017. Results reveal that profitability is negatively associated with both a bank’s contribution to systemic risk and its idiosyncratic risk, and an over-reliance on non-interest income, wholesale funding and leverage is associated with higher risks. Low competition is associated with low idiosyncratic risk but a high contribution to systemic risk. Lastly, the problem loans ratio and the cost-to-income ratio are found to be key factors that influence bank profitability. The paper’s findings suggest that policy makers should strive to better understand the source of bank profitability, especially where there is an over-reliance on market-based non-interest income, leverage, and wholesale funding.