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The determinants of net interest income in the Mexican banking system: an integrated model

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Author Info
Joaquín Maudos Villarroya () (Universitat de València)
Liliana Solís () (Universitat de València)

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Abstract

This paper analyzes net interest income in the Mexican banking system over the period 1993-2005. Taking as reference the seminal work by Ho and Saunders (1981) and subsequent extensions by other authors, our study models the net interest margin simultaneously including operating costs and diversification and specialization as determinants of the margin. The results referring to the Mexican case show that its high margins can be explained mainly by average operating costs and by market power. Although non-interest income has increased in recent years, its economic impact is low. El trabajo analiza el margen de intermediación de la banca Mexicana en el periodo 1996-2005. Tomando como referencia el trabajo seminal de Ho and Saunders (1981) y extensiones posteriores de otros autores, nuestro estudio modeliza el margen de intermediación incluyendo simultáneamente los costes operativos y la diversificación y especialización como determinantes del margen. Los resultados referidos al caso mexicano muestran que los altos márgenes vienen explicados principalmente por los costes medios operativos y por el poder de mercado. Si bien los ingresos no financieros han aumentando en los últimos años, su impacto económico es reducido.

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Publisher Info
Paper provided by Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie) in its series Working Papers. Serie EC with number 2009-05.

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Length: 36 pages
Date of creation: Jun 2009
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Publication status: Published by Ivie
Handle: RePEc:ivi:wpasec:2009-05

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Keywords: Banca; Margen financiero; Costes operativos; Poder de Mercado; Ingresos no financieros. banking; net interest income; operating cost; non-interest income;

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Find related papers by JEL classification:
G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Mortgages
L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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  2. Claeys, Sophie & Vander Vennet, Rudi, 2008. "Determinants of bank interest margins in Central and Eastern Europe: A comparison with the West," Economic Systems, Elsevier, vol. 32(2), pages 197-216, June. [Downloadable!] (restricted)
  3. Lepetit, Laetitia & Nys, Emmanuelle & Rous, Philippe & Tarazi, Amine, 2008. "The expansion of services in European banking: Implications for loan pricing and interest margins," Journal of Banking & Finance, Elsevier, vol. 32(11), pages 2325-2335, November. [Downloadable!] (restricted)
  4. Allen, Linda, 1988. "The Determinants of Bank Interest Margins: A Note," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 23(02), pages 231-235, June. [Downloadable!]
  5. Martinez Peria, Maria Soledad & Mody, Ashoka, 2004. "How Foreign Participation and Market Concentration Impact Bank Spreads: Evidence from Latin America," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 36(3), pages 511-37, June.
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  6. Saunders, Anthony & Schumacher, Liliana, 2000. "The determinants of bank interest rate margins: an international study," Journal of International Money and Finance, Elsevier, vol. 19(6), pages 813-832, December. [Downloadable!] (restricted)
  7. Bruno, Giovanni S.F., 2005. "Approximating the bias of the LSDV estimator for dynamic unbalanced panel data models," Economics Letters, Elsevier, vol. 87(3), pages 361-366, June. [Downloadable!] (restricted)
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  8. Brock, Philip L. & Rojas Suarez, Liliana, 2000. "Understanding the behavior of bank spreads in Latin America," Journal of Development Economics, Elsevier, vol. 63(1), pages 113-134, October. [Downloadable!] (restricted)
  9. Rubén Hernández-Murillo, 2007. "Experiments in financial liberalization: the Mexican banking sector," Review, Federal Reserve Bank of St. Louis, issue Sep, pages 415-432. [Downloadable!]
  10. Blundell, Richard & Bond, Stephen, 1998. "Initial conditions and moment restrictions in dynamic panel data models," Journal of Econometrics, Elsevier, vol. 87(1), pages 115-143, August. [Downloadable!] (restricted)
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  11. Solís, Liliana & Maudos, Joaquín, 2008. "The social costs of bank market power: Evidence from Mexico," Journal of Comparative Economics, Elsevier, vol. 36(3), pages 467-488, September. [Downloadable!] (restricted)
  12. Windmeijer, Frank, 2005. "A finite sample correction for the variance of linear efficient two-step GMM estimators," Journal of Econometrics, Elsevier, vol. 126(1), pages 25-51, May. [Downloadable!] (restricted)
  13. Bun, Maurice J. G. & Kiviet, Jan F., 2003. "On the diminishing returns of higher-order terms in asymptotic expansions of bias," Economics Letters, Elsevier, vol. 79(2), pages 145-152, May. [Downloadable!] (restricted)
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  14. Demirguc, Asli & Huizinga, Harry, 1999. "Determinants of Commercial Bank Interest Margins and Profitability: Some International Evidence," World Bank Economic Review, Oxford University Press, vol. 13(2), pages 379-408, May.
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  15. Gaston R. Gelos, 2006. "Banking Spreads in Latin America," IMF Working Papers 06/44, International Monetary Fund. [Downloadable!]
  16. Maudos, Joaquin & Fernandez de Guevara, Juan, 2004. "Factors explaining the interest margin in the banking sectors of the European Union," Journal of Banking & Finance, Elsevier, vol. 28(9), pages 2259-2281, September. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Gloria M. Soto Pacheco & Cristóbal González & Laura Ballester & Román Ferrer, 2009. "Determinants of interest rate exposure of Spanish banking industry," Working Papers. Serie EC 2009-07, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie). [Downloadable!]
  2. Ana Villar & César Camisón Zornoza & Montserrat Boronat, 2009. "New challenges in competitiveness: knowledge development and coopetition," Working Papers. Serie EC 2009-04, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie). [Downloadable!]
  3. Joaquín Alegre & Ricardo Chiva, 2009. "Entrepreneurial orientation, organizational learning capability and performance in the ceramic tiles industry," Working Papers. Serie EC 2009-08, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie). [Downloadable!]
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