Impact Of Non-interest Income Research Articles

The Impact of Non-Interest Income on Commercial Bank Profitability in the Middle East and North Africa (MENA) Region

This study examines the effects of non-interest income on bank performance in the Middle East and North Africa (MENA) region, addressing existing research gaps and conflicting results. The analysis is based on data from 40 banks (5 banks from each country) operating in Bahrain, Egypt, Jordan, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates between 2010 and 2022. Using correlation analysis and three regression models (OLS, FE, and RE), this study explores the relationship between non-interest income, overheads, capital adequacy, loan loss provision, bank size, and return on assets. The findings reveal positive associations among banks’ overhead, size, capital adequacy, and loan loss provision. Additionally, a favorable correlation is observed between non-interest income and bank performance. Non-interest income significantly influences the profitability of MENA region banks across all three models, supporting the main hypothesis. While the study’s limitations include sample size and geographic focus, the findings of this study provide valuable insights for policymakers, allowing them to recognize the positive impact of increasing non-interest income on commercial bank profitability in the MENA region and consider implementing policies that encourage and support banks in diversifying their income sources.

A Study on the Impact of Non-Interest Income on Commercial Banks Performance

With an upsurge of interest rate marketisation and internet finance, the role of commercial bank revenue in China's non-interest sector is turning more significant in terms of the bank's operating performance. From 2017 through 2021, the study explores the relationship between non-interest revenue and operating performance in business banks. Simultaneously, the article explores the various degrees of influence of three forms of non-interest revenue on operating performance and compares non-interest income variances on operating performance amongst banks with different equity natures. The empirical data show that non-interest income from commercial banks beneficially effects on their profitability; the proportion of fees and commissions contributes more to the profitability; and the impact on operating performance is more pronounced for state-controlled and joint-stock banks than for urban and agribusiness banks. As a consequence, commercial banks should pursue other businesses aggressively in order to diversify non-interest income sources and play a role in bank operations.

The Impact of Non-Interest Income on the Performance of Commercial Banks in the ASEAN Region

This study investigates how non-interest income affects the performance of commercial banks in the ASEAN region. Using data from 36 commercial banks in ASEAN countries from 2008 to 2020 and Bayesian analysis techniques, the results of this study indicate that non-interest income negatively affects commercial banks’ performance in the ASEAN region. In addition, the quantile regression results demonstrated that non-interest income negatively affects commercial banks’ performance in the ASEAN region at all three percentiles (25th, 50th, and 75th). Additionally, we identified a non-interest income threshold of 59.3 percent of total income for commercial banks in the ASEAN region. In light of banking competition and the necessity for commercial banks to diversify their income streams, we offer a variety of policy implications to increase the performance of commercial banks.

Impact of Noninterest Income on Bank Risk-Taking and Bank Lending Spread

This study investigates the impact of diversification between traditional margin income and nontraditional income (noninterest-based income) on bank risk-taking and bank lending spread for banks operating in Pakistan. Bank risk is measured with the nonperforming loan ratio and bank [Formula: see text]-score. Data of this study is obtained from financial statements, which are an annual publication of State Bank of Pakistan, for the period 2006–2016 for 52 banks in Pakistan. Panel regression with the generalized method of moments (GMM) estimator is employed. The study reveals that an increase in noninterest income increases bank risk-taking (spending on highly risky assets), as noninterest income is riskier than interest income. It is also revealed that banks with greater dependence on noninterest income may grant a loan with lower lending spread. These results have implications for the betterment of the banking system, regulatory authority, and stakeholders as well. From a regulatory perspective, the study provides guidelines for making rules and regulations to control and monitor the dependence on noninterest income as well as on interest income. Pakistan banks regulatory authority should focus on the increase in disclosure of the composition of noninterest income and this disclosure would increase understanding of changing environment of banking in Pakistan.

Impact of Non-Interest Income on Bank Efficiency: Evidence from Sri Lanka

The South Asian Journal of Finance is an international open access and double-blind peer reviewed journal focusing on the areas of finance in South Asian region. It is published bi-annually (June and December).

Bankss Non-Traditional Activities Under Regulatory Changes: Impact on Risk, Performance and Capital Adequacy

Using the big six Canadian chartered banks quarterly financial statements and daily stock market data from 1982 to 2010, we examine the impact of non-interest income on Canadian banks’ risk, performance and capital under the different major regulatory changes made to the Bank Act of Canada. We document a significant increasing trend in non-interest income with a substitution effect between non-interest income and net interest margin following the 1987 amendment to the Bank Act allowing commercial banks to acquire (or merge with) investment dealers and brokerage firms. Our results show that Canadian banks’ expansion into non-traditional activities had resulted into decreased risk and increased performance benefitting from income diversification. Moreover, while adhering to capital adequacy regulation, reshuffling banks’ portfolio towards non-traditional activities did not reduce Canadian banks’ capital ratio, buttressing the effectiveness of capital adequacy regulation in Canada in linking banks capital allocation with their risk taking in spite of the re-regulation towards universal banking.

Banks’ non-traditional activities under regulatory changes: impact on risk, performance and capital adequacy

ABSTRACTUsing the big six Canadian chartered banks quarterly financial statements and daily stock market data from 1982 to 2018, we examine the impact of non-interest income on Canadian banks’ risk, performance and capital under the different major regulatory changes made to the Bank Act of Canada. Our results show that Canadian banks’ expansion into non-traditional activities had slightly decreased their risks and significantly improved their performance benefitting from income diversification. Moreover, while adhering to capital adequacy regulation, reshuffling banks’ portfolio towards non-traditional activities did not reduce Canadian banks’ capital ratio. In spite of the re-regulation towards universal banking against ring-fencing, this feature buttresses the effectiveness of capital adequacy regulation in Canada in linking banks capital allocation with their risk taking.

Impact of Non-Interest Income on Financial Performance of Joint Venture Banks in Nepal

The research was conducted to identify the non-interest income variables that will likely affect the financial performance of the joint venture banks of Nepal. The main objective of the study is to analyze the prominence of non-interest income and its effect on financial performance of joint venture banks in Nepal. This study will help the banks to identify other sources of income of the bank and try to look at its impact on the overall profitability and risk intention. To measure the financial performance, the indicator of profitability i.e. returns on assets and return on equity are taken into consideration for the study as a dependent variable and assets size, letter of credit fee, guarantee income, remittance fee, dividend income, exchange income, service charge, and renewal fee as an independent variable. Both descriptive and inferential analyses were performed to capture the relationship. From the result analysis, it is observed that the non-interest income variables that would affect the financial performance of the joint venture banks. It is observed that not all variables have equal effect on the profitability as measure of financial performance, for joint ventures the factors like assets size, letter of credit fee, guarantee income, remittance fee, dividend income, exchange income, service charge, and renewal fee have a significant relationship with the measure of financial performance that is return on assets and return on equity. Apart from the interest income, there are lot of non-interest variables which leads to profitability so the banks looking to increase its profitability with lesser risk need to take these variables into consideration. Results indicate that banks need to keep the non-interest income variables into consideration at times for improving the financial performance of the joint venture banks.

The Impact of Non-Interest Income on Banks’ Profitabilities

The Impact of Non-Interest Income on Banks’ Profitabilities

Erratum to “The impact of non-interest income on bank risk in Australia” [Journal of Banking and Finance 73C (2016) 16–37

Erratum to “The impact of non-interest income on bank risk in Australia” [Journal of Banking and Finance 73C (2016) 16–37

Noninterest Income and Financial Performance at Jordanian Banks

This paper investigated the impact of noninterest income on the performance of 13 banks in Jordan during the period 2000-2015. The impact of size of bank, loans, capital adequacy and general expenses on banks performance found to have a significant impact on banks performance. In more details, general expenses decrease bank performance, while capital adequacy, loans and size increase it. In addition, non-interest income increases equity capital adequacy and this in turn affects the profitability positively.

The impact of non-interest income on bank risk in Australia

Abstract The relationship between bank revenue composition and bank risk in Australia is modeled using data drawn from Australian bank confidential regulatory returns. It is found that those banks with lower levels of non-interest income and higher revenue concentration are less risky, consistent with previous international evidence. Evidence is also found supportive of increased risk due to too-big-to-fail effects, with this risk increase being offset by a decline in large bank risk after the crisis of 2007–2008. Non-interest income is generally found to be risk increasing, but some types of non-interest income are risk reducing when bank specialization effects are considered. It is also found that the 2008 financial crisis changed some aspects of the relationship between bank risk and revenue composition.

Does non-interest income make banks more risky? Retail- versus investment-oriented banks

In this paper, we show that the impact of non-interest income on bank risk differs between retail- and investment-oriented banks. More specifically, while retail-oriented banks such as savings, cooperative and other banks that focus on lending and deposit-taking services become significantly more stable (in the sense of having a higher Z-score) if they increase their share of non-interest income, investment-oriented banks become significantly more risky. They do not only generate a higher share of their income from non-traditional activities, but also engage in significantly different activities from retail-oriented banks. This might limit the potential benefits to investment-oriented banks of diversifying into non-interest income. Overall, therefore, our paper implies that it is important to distinguish between retail- and investment-oriented banks when drawing general conclusions regarding the impact of non-interest income on bank risk.

Determinan Profitabilitas Bank: Suatu Studi pada Bank yang Terdaftar di BEI

This research is aimed at providing empirical evidence of the impact of non interest income, Non Interest Expense, Loan Loss Provisions, Equity, Total Assets, GDP, Market Capitalization on ROA. This research sampled 20 banks listed in Indonesia Stock Exchange during the research period that is 2003 to 2011. Data were analyzed using multiple regression method. Based on the result of analysis, it is concluded that Non Interest Income, Non Interest Expense, Loan Loss Provisions, Equity, Total Assets, GDP, Market Capitalization have significant effect on ROA.

The Impact of Non-interest Income on the Efficiency of China’s Banking Sector

This paper investigates the impact of non-interest income on bank efficiency based on data from China banking sector during the period 1996~2010 by establishing DEA model and Panel-Tobit model. The efficiency levels of China banking sector are estimated by employing traditional DEA model, which only considers loans and investments as the output variables, and alternative DEA model, which considers non-interest income as an additional output variable. The results of parametric and non-parametric univariate tests on the efficiency scores show that there are no significant differences in mean and median efficiency calculated from traditional and alternative DEA models. In other words, the inclusion of non-interest income in output vector does not have a statistically significant influence on the efficiency of China banking sector. Additionally, we normalize each bank’s efficiency score under these two DEA models in order to avoid potential estimation bias due to the fact that the alternative DEA model has one more output variable than the traditional DEA model, and the findings suggest that only a small proportion of banks present an increase in efficiency level with inclusion of non-interest income, while no significant changes are seen on most banks’ efficiency levels. Also, further analysis by establishing Panel-Tobit regression model finds that the relationship between the share of noninterest income to the net operating revenue and the bank efficiency score is not significant, which suggests that the bank efficiency doesn’t increase significantly with the increasing non-interest income share. Furthermore, the bank efficiency also does not present a significant increase with the time. Overall, our findings suggest that the inclusion of non-interest income does not significantly increase the efficiency level of China banking sector.

Does Non-Interest Income Make Banks More Risky? Retail- Versus Investment-Oriented Banks

In this paper, we analyze the impact of banks' non-interest income share on risk in the German banking sector for the period between 2002 and 2010. Using linear and quantile regression estimators, we find that the impact of non-interest income on risk significantly differs depending on banks' overall business model. More specifically, we show banks with retail-oriented business model such as savings banks, cooperative banks and other retail-oriented banks become significantly more stable if they increase their share of non-interest income. Investment-oriented banks, in contrast, become significantly more risky. They do not only report a significantly higher share of non-interest income, but also differ in terms of their activities from retail-oriented banks. Overall, this indicates that retail-oriented banks should increase their share of non-interest income to become more stable. Investment-oriented banks, in contrast, should decrease it. Our results imply that banks are significantly less risky if they have a more balanced income structure and neither depend heavily on interest nor on non-interest income. Furthermore, they indicate that the impact of non-interest income on risk significantly depends on the activities used to generate non-interest income with retail-oriented activities being significantly less risky than investment-oriented activities such as those pertaining to capital markets activities.

The Impact of Non Interest Income on Bank Risk in Australia

This paper considers the relationship between bank revenue composition and bank risk in Australia, using data drawn from Australian bank confidential regulatory returns. It is found that those banks with lower levels of non interest income and higher revenue concentration are less risky, consistent with previous international evidence. Decreasing returns to scale in bank risk is found, with some evidence supportive of too big to fail effects. Non interest income is found to be risk increasing, but it is proposed that some types of non interest income may be risk reducing when bank specialisation effects are considered. It is concluded that care must be taken when selecting the appropriate peers for benchmarking, to reflect difference in income composition.

The Impact of Non Interest Income on Bank Risk in Australia

The Impact of Non Interest Income on Bank Risk in Australia