Noninterest Income and Financial Performance at U.S. Commercial Banks

Noninterest income now accounts for over 40% of operating income in the U.S. commercial banking industry. This paper demonstrates a number of empirical links between bank noninterest income, business strategies, market conditions, technological change, and financial performance between 1989 and 2001...

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Bibliographic Details
Published in:The Financial review (Buffalo, N.Y.) N.Y.), 2004-02, Vol.39 (1), p.101-127
Main Authors: DeYoung, Robert, Rice, Tara
Format: Article
Language:English
Subjects:
banks
Commercial banks
deregulation
Financial performance
G21
G28
noninterest income
Studies
Working capital
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Summary:Noninterest income now accounts for over 40% of operating income in the U.S. commercial banking industry. This paper demonstrates a number of empirical links between bank noninterest income, business strategies, market conditions, technological change, and financial performance between 1989 and 2001. The results indicate that well‐managed banks expand more slowly into noninterest activities, and that marginal increases in noninterest income are associated with poorer risk‐return tradeoffs on average. These findings suggest that noninterest income is coexisting with, rather than replacing, interest income from the intermediation activities that remain banks' core financial services function.
ISSN:0732-8516
1540-6288
DOI:10.1111/j.0732-8516.2004.00069.x