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Bank sales, spread and profitability: an empirical analysis

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  • G. E. Halkos
  • M. N. Georgiou

Abstract

This study proves mathematically that in any bank if the growth rate of sales is higher than the absolute growth rate of bank's lending rate, then bank's profits will not decrease. This mathematical expression can be considered as the condition for keeping a bank profitable. An econometric analysis using panel data from the Western European banking sector supports our afore-mentioned mathematical theory.

Suggested Citation

  • G. E. Halkos & M. N. Georgiou, 2005. "Bank sales, spread and profitability: an empirical analysis," Applied Financial Economics Letters, Taylor and Francis Journals, vol. 1(5), pages 293-296, September.
  • Handle: RePEc:taf:apfelt:v:1:y:2005:i:5:p:293-296
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    References listed on IDEAS

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    1. Demirguc, Asli & Huizinga, Harry, 1999. "Determinants of Commercial Bank Interest Margins and Profitability: Some International Evidence," The World Bank Economic Review, World Bank Group, vol. 13(2), pages 379-408, May.
    2. Davis, Peter, 2002. "Estimating multi-way error components models with unbalanced data structures," Journal of Econometrics, Elsevier, vol. 106(1), pages 67-95, January.
    3. Paul R. Masson & Miguel A. Savastano & Sunil Sharma, 2019. "The Scope for Inflation Targeting in Developing Countries," World Scientific Book Chapters, in: Macroeconomic Modelling and Monetary and Exchange Rate Regimes, chapter 10, pages 331-383, World Scientific Publishing Co. Pte. Ltd..
    4. Berger, Allen N. & Hancock, Diana & Humphrey, David B., 1993. "Bank efficiency derived from the profit function," Journal of Banking & Finance, Elsevier, vol. 17(2-3), pages 317-347, April.
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    Cited by:

    1. Ioannis Gasteratos & Michael Karamalis & Andreas Koutoupis, 2016. "Shadow Economy Worsens Income distribution," International Journal of Economics & Business Administration (IJEBA), International Journal of Economics & Business Administration (IJEBA), vol. 0(3), pages 80-92.
    2. J. Mukuddem-Petersen & M. A. Petersen & I. M. Schoeman & B. A. Tau, 2008. "Dynamic modelling of bank profits," Applied Financial Economics Letters, Taylor and Francis Journals, vol. 4(3), pages 157-161.

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