European bank profitability: the Great Convergence?

14 Pages Posted: 9 Feb 2022

See all articles by Martien Lamers

Martien Lamers

Ghent University - Faculty of Economics and Business Administration

Thomas Present

Ghent University - Department of Economics

Rudi Vander Vennet

Ghent University - Department of Financial Economics

Date Written: February 7, 2022

Abstract

Have Euro Area banks restored viability in the post-crisis era? We investigate profitability convergence for Euro Area banks over the period 2009-2020 using the concepts of beta and sigma convergence and a club clustering algorithm. Our evidence is consistent with a slow catch up of the weaker banks, but we also document that better performing banks converge towards a lower profit level, suggesting a ‘great convergence' towards the middle. Moreover, we identify a cluster of banks exhibiting dismal profit dynamics, indicating the need for a restructuring of part of the Euro Area banking sector.

Keywords: Euro Area banks, bank profitability, beta convergence, sigma convergence, club clustering analysis

JEL Classification: C38, G20, G21.

Suggested Citation

Lamers, Martien and Present, Thomas and Vander Vennet, Rudi, European bank profitability: the Great Convergence? (February 7, 2022). Available at SSRN: https://ssrn.com/abstract=4030508 or http://dx.doi.org/10.2139/ssrn.4030508

Martien Lamers (Contact Author)

Ghent University - Faculty of Economics and Business Administration ( email )

Ghent, B-9000
Belgium

Thomas Present

Ghent University - Department of Economics ( email )

Belgium

Rudi Vander Vennet

Ghent University - Department of Financial Economics ( email )

Ghent, 9000
Belgium
+32 9 264 35 13 (Phone)
+32 9 264 35 92 (Fax)

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