Academic journal article ABA Banking Journal

Noninterest Income Shoulders More of the Weight

Academic journal article ABA Banking Journal

Noninterest Income Shoulders More of the Weight

Article excerpt

In times like these, full of inverted yield curves, contracting margins, and asset quality concerns, noninterest income can make the difference between hitting and missing earnings targets. Every CFO knows this, and each one works diligently to maximize revenue in these lines, at the same time balancing the concerns of customers.

Not surprisingly, over the last two years the fraction of revenue generated by noninterest related channels has steadily increased in banking. The chart shows that on a median basis the ratio of noninterest income to net interest income has increased from 18% in the first quarter of 2006 to 23% in the fourth-quarter of 2007 for publicly traded banks and thrifts. The most notable increase came between the third and fourth quarters of 2007 where the ratio increased by a little more than three percentage points.

Explaining some of the change, the chart shows that over the same period the noninterest income median growth rate was greater than the net interest income median growth rate. The second quarters of the year tended to have the largest spread at about 15 percentage points in each of the prior two years.

Speculating on the performance into late 2008 and 2009, it is hard to imagine that net interest income and margins can compress much more. …

Search by... Author
Show... All Results Primary Sources Peer-reviewed

Oops!

An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.