February 2021

What Drives Bank Peformance?

Luca Guerrieri and James Collin Harkrader

Abstract:

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.

DOI: https://doi.org/10.17016/FEDS.2021.009

PDF: Full Paper

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Last Update: February 16, 2021