Non-interest income and bank performance during the financial crisis

Abstract

ABSTRACTThis article investigates how the non-interest income influences risk and return of U.S. bank holding companies during the financial crisis of 2007–2009, based on the bank-level panel data. Our analysis shows that the non-interest incomes have a positive impact on bank risk and return during the crisis period. Furthermore, non-interest incomes related to nontraditional activities such as trading and investment banking activities have an insignificant impact on bank risk and returns. This study suggests that non-interest income is not the source of bank instability and low returns during the financial crisis.