Non-Interest Income Activities and Bank Lending

Pejman Abedifar (), Philip Molyneux () and Amine Tarazi
Additional contact information
Pejman Abedifar: LAPE - Laboratoire d'Analyse et de Prospective Economique - GIO - Gouvernance des Institutions et des Organisations - UNILIM - Université de Limoges

Post-Print from HAL

Abstract: This paper investigates the impact of non-interest income businesses on bank lending. Using quarterly data on 8,287 U.S. commercial banks over 2003-2010, we find that the non-interest income activities of banks with total assets above $100 million ('non-micro' banks) influence credit risk. In particular, banks that have higher income from fiduciary activities have lower credit risk. The impact is more pronounced during the post-crisis period. Our findings suggest that fiduciary activities induce managers to behave more prudently in lending because such activities are found to increase banks' franchise value. Other non-interest income activities that may be thought to have an influence on lending - such as service charges on deposit accounts - do not appear to have any robust relationship with the quality of credit extended. Moreover, we find little evidence of income or price cross- subsidization between traditional intermediation and non-interest income activities, except for fiduciary activities after the crisis. Furthermore, we find that micro banks suffer from diseconomies in joint production of non-interest income activities and lending.

Keywords: Non-interest Income; Fiduciary; Credit Risk; Spread; Cost Complementarities (search for similar items in EconPapers)
Date: 2018
References: Add references at CitEc
Citations: View citations in EconPapers (5)

Published in Journal of Banking and Finance, 2018, 87, pp.411-426

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
Working Paper: Non-Interest Income Activities and Bank Lending (2014)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-01636263

Access Statistics for this paper

More papers in Post-Print from HAL
Bibliographic data for series maintained by CCSD ().