Open AccessWhat Drives Bank Peformance?
Author(s) -
Luca Guerrieri,
James Collin Harkrader
Publication year - 2021
Publication title -
finance and economics discussion series
Language(s) - English
Resource type - Journals
eISSN - 2767-3898
pISSN - 1936-2854
DOI - 10.17016/feds.2021.009
Subject(s) - revenue , loan , variation (astronomy) , point (geometry) , econometrics , contrast (vision) , monetary economics , business , economics , finance , computer science , mathematics , physics , geometry , artificial intelligence , astrophysics
Focusing on some key metrics of bank performance, such as revenues and loan charge-off rates, we estimate the fraction of the observed variation in these metrics that can be attributed to changes in economic conditions. Macroeconomic factors can explain the preponderance of the fluctuations in charge-off rates. By contrast, bank-specific, idiosyncratic factors account for a sizable share of the variation in bank revenues. These results point to importance of bank-specific business models as a driver of performance.