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Bank profitability and the business cycle

Author

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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.

Suggested Citation

  • Ugo Albertazzi & Leonardo Gambacorta, 2006. "Bank profitability and the business cycle," Temi di discussione (Economic working papers) 601, Bank of Italy, Economic Research and International Relations Area.
    • Handle: RePEc:bdi:wptemi:td_601_06
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    References listed on IDEAS

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    More about this item

    Keywords

    bank profitability; economic cycle; macro-prudential analysis;
    All these keywords.

    JEL classification:

    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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