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Banks' noninterest income and securities holdings in a low interest rate environment: The case of Italy
Author(s) -
Molyneux Philip,
Reghezza Alessio,
Torriero Chiara,
Williams Jonathan
Publication year - 2021
Publication title -
european financial management
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.311
H-Index - 64
eISSN - 1468-036X
pISSN - 1354-7798
DOI - 10.1111/eufm.12268
Subject(s) - restructuring , business , maturity (psychological) , fixed income , portfolio , net interest income , payment , commission , broker dealer , interest rate , sample (material) , financial system , finance , investment banking , bond , psychology , developmental psychology , chemistry , chromatography
Using a sample of 440 Italian banks over the period 2007–2016, we find that low interest rates motivate banks to expand their fee and commission income and to restructure their securities portfolios. A granular breakdown suggests that banks grow noninterest income in various ways, including portfolio management, brokerage and consultancy services and increase fee income from current account and payment services. In addition, banks rebalance securities portfolios away from those “held for trading” to securities “available for sale” and “held to maturity.” Our findings allude to different behavior between large and small banks: while larger banks increase brokerage, consultancy and portfolio management services, smaller banks generate fees from customer current accounts.