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Finance and Economics Discussion Series
Finance and Economics Discussion Series logo links to FEDS home page The Profitability of Small, Single-Market Banks In an Era of Multimarket Banking
Timothy H. Hannan and Robin A. Prager

Abstract: This paper examines the relationship between multimarket bank presence and the profitability (and therefore viability) of small, single-market banks. We find that increased presence of multimarket banks is associated with a significant reduction in the profitability of small, single-market banks operating in rural banking markets, but not of those operating in urban markets. We explore this relationship by breaking single-market bank profits down into several components in order to shed light on the mechanisms through which multimarket bank presence might influence the profitability of single-market banks.

Keywords: Banks, competition, pricing

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Last update: November 21, 2006