The profitability of European banks: a cross-sectional and dynamic panel analysis

JA Goddard, P Molyneux, John Ogilvie Stephen Wilson

Research output: Contribution to journalArticlepeer-review

394 Citations (Scopus)

Abstract

The profitability of European banks during the 1990s is investigated using cross-sectional, pooled cross-sectional time-series and dynamic panel models. Models for the determinants of profitability incorporate size, diversification, risk and ownership type, as well as dynamic effects. Despite intensifying competition there is significant persistence of abnormal profit from year to year. The evidence for any consistent or systematic size-profitability relationship is relatively weak. The relationship between the importance of off-balance-sheet business in a bank's portfolio and profitability is positive for the UK, but either neutral or negative elsewhere. The relationship between the capital-assets ratio and profitability is positive.

Original languageEnglish
Pages (from-to)363-381
Number of pages19
JournalManchester School
Volume72
Issue number3
Publication statusPublished - Jun 2004

Keywords

  • MARKET-POWER
  • HOLDING COMPANIES
  • EFFICIENCY
  • DETERMINANTS
  • OWNERSHIP
  • PROFITS
  • SAVINGS
  • FIRM
  • COMPETITION
  • PERSISTENCE

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