Shift towards non-interest income and its impact on banking profitability
Shift towards non-interest income and its impact on banking profitability

Summary/Abstract: Growing competition in the banking industry, innovation trends, shrinking in the interest margin, growing regulations and costs have realigning the role of the Non-interest interest to bank’s long –term goals. The paper addresses the shift of banking industry toward Non-interest income. The focus is put on the trend of Non-interest income in the last few decades as well as the trend in Republic of Macedonia. Furthermore, the paper address the outstanding dilemma for the influence of Non-interest income on the bank income, since most of the recent studies shows mix results for the impact of this shift on the bank performances. The empirical findings indicate that banking sector in RM shows steady upward trend toward increase of Non-interest income, unlike the general trend of rapid shift toward Non-interest income by the developed banking industries. Yet, regression analysis pointed Non-interest income as significant variable in Net income of the banking sector of Republic of Macedonia which generate solid base for further development of Net interest income in Total Bank Income. Other significant variables influencing Net Income of the banks are Interest costs and Total assets, indicating that bank should pay more efficiency on interest costs as well as pointing out that higher performance can be align by bigger banks.

• Details
• Contents