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Portfolio analysis of big US banks’ performance: the fee business lines factor

Author

Listed:
  • Christian Calmès

    (Université du Québec (Outaouais)
    Université du Québec (Montréal))

  • Raymond Théoret

    (Université du Québec (Outaouais)
    Université du Québec (Montréal)
    Université du Québec (Montréal))

Abstract

Fee business lines are often considered more volatile than loan business and characterized by an unfavourable risk–return trade-off. However, using FDIC samples from 2001 to 2016, we find that non-interest income still contributes positively to the performance of US banks—without impairing their solvability. On the one hand, our portfolio analysis suggests that the Big 4 seem to benefit from non-interest income, although their rescue of investment banks might not yet be profitable. We also find that trading, loan sales and securitization add flexibility in bank risk management. On the other hand, our results also suggest that the post-crisis regulation appears detrimental to bank performance.

Suggested Citation

  • Christian Calmès & Raymond Théoret, 2021. "Portfolio analysis of big US banks’ performance: the fee business lines factor," Journal of Banking Regulation, Palgrave Macmillan, vol. 22(2), pages 112-132, June.
  • Handle: RePEc:pal:jbkreg:v:22:y:2021:i:2:d:10.1057_s41261-020-00131-3
    DOI: 10.1057/s41261-020-00131-3
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    More about this item

    Keywords

    Banks; Diversification; Traditional income; Non-traditional fees; Non-interest income; Regulation;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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