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

Posted: 20 Jan 2004

See all articles by Tara Rice

Tara Rice

BlackRock, Inc

Robert DeYoung

University of Kansas School of Business

Abstract

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.

Keywords: Banks, noninterest income, deregulation

JEL Classification: G21, G28

Suggested Citation

Rice, Tara and DeYoung, Robert, Noninterest Income and Financial Performance at U.S. Commercial Banks. Financial Review, Vol. 39, pp. 101-127, 2004. Available at SSRN: https://ssrn.com/abstract=487704

Tara Rice

BlackRock, Inc

55 East 52nd Street
New York City, NY 10055
United States

Robert DeYoung (Contact Author)

University of Kansas School of Business ( email )

Capitol Federal Hall
1654 Naismith Drive
Lawrence, KS 66045
United States
785-864-1806 (Phone)

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