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Bank profitability and the business cycle

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  • Ugo Albertazzi

    ()
    (Bank of Italy - Economic Research Department)

  • Leonardo Gambacorta

    ()
    (Bank of Italy - Economic Research Department)

Abstract

An important element of the macro-prudential analysis is the study of the link between business cycle fluctuations and banking sector profitability and how this link is affected by institutional and structural characteristics. This work estimates a set of equations for net interest income, non-interest income, operating costs, provisions, and profit before taxes, for banks in the main industrialized countries and evaluates the effects on banking profitability of shocks to both macroeconomic and financial factors. Distinguishing mainly the euro area from Anglo-Saxon countries, the analysis also identifies differences in the resilience of the respective banking systems and relates them to the characteristics of their financial structure.

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Bibliographic Info

Paper provided by Bank of Italy, Economic Research and International Relations Area in its series Temi di discussione (Economic working papers) with number 601.

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Date of creation: Sep 2006
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Handle: RePEc:bdi:wptemi:td_601_06

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Web page: http://www.bancaditalia.it
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Keywords: bank profitability; economic cycle; macro-prudential analysis;

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