Tehran Institute for Advanced Studies (TeIAS)

/ Noninterest Income and Bank Lending __ Pejman Abedifar

Talk

Noninterest Income and Bank Lending

December 24, 2019

Venue

Khatam University, Building No2.
Address: Mollasadra Blvd., North Shirazi St., East Daneshvar St., No.17. See location on Google map

+982189174612

Dr. Pejman Abedifar

Lecturer in Banking and Finance at the University of St Andrews

Overview

This paper examines the influence of non-interest activities on bank lending in terms of loan quality and interest spread. We also investigate the possible existence of profit complementarities between non- interest activities and lending. Using quarterly data on 6921 U.S. commercial banks between 2007:Q3 to 2016:Q3 we find that non-interest activities have no adverse influence on bank credit risk. This is the case for banks of different asset size (including systemically important banks) as well as for distressed banks. There is evidence that banks with assets between $100 million and $1 billion that have a greater share of fiduciary income have lower credit risk. They also have lower interest rates on loans secured by real estate, and higher franchise values, particularly post-crisis. Moreover, banks in the aforementioned size range benefit from synergies in joint production of non-interest income and lending, whereas other banks, in particular smaller banks (below $100 million in assets) suffer from diseconomies of joint production. Larger banks exhibit cross-subsidization between several non-interest activities and lending business.

Biography

Pejman is a lecturer in Banking and Finance at the University of St Andrews. He joined the University in June 2014. He received his PhD from the Université de Limoges, France. His PhD dissertation focuses on banking and it examines three topics including Islamic banking, noninterest income of banks and finance-growth nexus. His current research projects include Islamic finance, stock price informativeness, trade credit and resolution of failed banks. Pejman has published articles in prestigious journals such as Review of Finance, Journal of Financial Stability, Journal of Banking & Finance and Journal of the American Academy of Religion. Before moving to academia, Pejman had been working in the EXIM bank of Iran for more than ten years (1997-2007). He was in charge of International Finance department.