The Profitability of Small, Single-Market Banks in an Era of Multimarket Banking

28 Pages Posted: 14 Dec 2006

See all articles by Timothy H. Hannan

Timothy H. Hannan

Board of Governors of the Federal Reserve System

Robin A. Prager

Board of Governors of the Federal Reserve System

Date Written: October 2006

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

JEL Classification: G21, L10

Suggested Citation

Hannan, Timothy and Prager, Robin, The Profitability of Small, Single-Market Banks in an Era of Multimarket Banking (October 2006). FEDS Working Paper No. 2006-41, Available at SSRN: https://ssrn.com/abstract=951412 or http://dx.doi.org/10.2139/ssrn.951412

Timothy Hannan (Contact Author)

Board of Governors of the Federal Reserve System ( email )

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Robin Prager

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States
202-452-3643 (Phone)
202-452-3819 (Fax)

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