How does non-interest income affect bank credit risk? Evidence before and during the COVID-19 pandemic

Asad Mehmood; Francesco De Luca

doi:10.1016/j.frl.2023.103657

How does non-interest income affect bank credit risk? Evidence before and during the COVID-19 pandemic

Financ Res Lett. 2023 May:53:103657. doi: 10.1016/j.frl.2023.103657. Epub 2023 Jan 21.

Authors

Asad Mehmood^{1

2}, Francesco De Luca¹

Affiliations

¹ Department of Management and Business Administration, University "G. d'Annunzio" of Chieti-Pescara - Viale Pindaro 42 - 65127, Pescara, Italy.
² Department of Accounting, Finance and Economics, Lincoln International Business School, University of Lincoln, Brayford Pool, Lincoln, LN6 7TS, United Kingdom.

Abstract

This paper considers the COVID-19 pandemic's role and investigates the impact of non-interest income on bank credit risk. Specifically, it performs a comparative analysis between before and during the pandemic periods. The data of listed banks are extracted from the BankFocus for 14 Asian emerging markets. The regression results indicate the positive influence of non-interest income on bank credit risk. Interestingly, the magnitude of the impact is higher in the pre-pandemic period, and it significantly reduces during the pandemic period. This study provides implications for bank practitioners and regulators.

Keywords: COVID-19 pandemic; Credit risk; Income diversification; Non-interest income.