Determinants of non-interest income in Malaysian banking industry : a comparative analysis on CIMB and RHB bank

We have analysed the determinants of non-interest income among banking industry in Malaysia. A comparative analysis between CIMB Bank and RHB Bank has been conducted from the period of 2004 till 2015. The main objective of this study is to identify the relationship between non-interest income of CIM...

Full description

Saved in:

Bibliographic Details
Main Author:	Baskaran, Meyappan
Format:	Thesis
Language:	eng eng
Published:	2017
Subjects:	HF1-6182 Commerce
Online Access:	https://etd.uum.edu.my/7633/1/s816190_01.pdf https://etd.uum.edu.my/7633/2/s816190_02.pdf
Tags:	Add Tag No Tags, Be the first to tag this record!

id	my-uum-etd.7633
record_format	uketd_dc
institution	Universiti Utara Malaysia
collection	UUM ETD
language	eng eng
advisor	Mohd Yusof, Rosylin
topic	HF1-6182 Commerce
spellingShingle	HF1-6182 Commerce Baskaran, Meyappan Determinants of non-interest income in Malaysian banking industry : a comparative analysis on CIMB and RHB bank
description	We have analysed the determinants of non-interest income among banking industry in Malaysia. A comparative analysis between CIMB Bank and RHB Bank has been conducted from the period of 2004 till 2015. The main objective of this study is to identify the relationship between non-interest income of CIMB Bank and RHB Bank with factors such as bank size, total loan, total equity, net interest margin and inflation in the short run and long run. This study employs time series analysis techniques such as Vector Error Correction Model (VECM), Johanssen Co-Integration Analysis and Forecast Error Variance Decomposition (FEVD) Analysis to identify the relationship among variables in the short run and long run. Based on our analysis bank size, total equity capital, net interest margin and inflation are the significant factors determine non-interest income of CIMB Bank whereas only bank size and net interest margin are the significant factor determines non-interest income of RHB Bank in the long run. According to FEVD analysis in the short run, total loan is the only significant factor in determining the non-interest income of CIMB Bank whereas bank size and inflation are the significant factor determining the non-interest income of RHB Bank. This study finds that each bank has their unique determinants of non-interest income. Both in the long run and short run the determinants of non-interest income differ between CIMB Bank and RHB Bank. The determinants of non-interest income differ between the banks may be due to policy of the banks towards non-interest business or the types of noninterest products the banks involved in. The findings are consistent with the industry expert opinion where banks are increasing their share of non-interest income in the areas which they have additional strength and competitive advantage
format	Thesis
qualification_name	other
qualification_level	Master's degree
author	Baskaran, Meyappan
author_facet	Baskaran, Meyappan
author_sort	Baskaran, Meyappan
title	Determinants of non-interest income in Malaysian banking industry : a comparative analysis on CIMB and RHB bank
title_short	Determinants of non-interest income in Malaysian banking industry : a comparative analysis on CIMB and RHB bank
title_full	Determinants of non-interest income in Malaysian banking industry : a comparative analysis on CIMB and RHB bank
title_fullStr	Determinants of non-interest income in Malaysian banking industry : a comparative analysis on CIMB and RHB bank
title_full_unstemmed	Determinants of non-interest income in Malaysian banking industry : a comparative analysis on CIMB and RHB bank
title_sort	determinants of non-interest income in malaysian banking industry : a comparative analysis on cimb and rhb bank
granting_institution	Universiti Utara Malaysia
granting_department	Othman Yeop Abdullah Graduate School of Business
publishDate	2017
url	https://etd.uum.edu.my/7633/1/s816190_01.pdf https://etd.uum.edu.my/7633/2/s816190_02.pdf
_version_	1747828245499215872
spelling	my-uum-etd.76332021-05-02T03:18:01Z Determinants of non-interest income in Malaysian banking industry : a comparative analysis on CIMB and RHB bank 2017 Baskaran, Meyappan Mohd Yusof, Rosylin Othman Yeop Abdullah Graduate School of Business Othman Yeop Abdullah Graduate School of Business HF1-6182 Commerce We have analysed the determinants of non-interest income among banking industry in Malaysia. A comparative analysis between CIMB Bank and RHB Bank has been conducted from the period of 2004 till 2015. The main objective of this study is to identify the relationship between non-interest income of CIMB Bank and RHB Bank with factors such as bank size, total loan, total equity, net interest margin and inflation in the short run and long run. This study employs time series analysis techniques such as Vector Error Correction Model (VECM), Johanssen Co-Integration Analysis and Forecast Error Variance Decomposition (FEVD) Analysis to identify the relationship among variables in the short run and long run. Based on our analysis bank size, total equity capital, net interest margin and inflation are the significant factors determine non-interest income of CIMB Bank whereas only bank size and net interest margin are the significant factor determines non-interest income of RHB Bank in the long run. According to FEVD analysis in the short run, total loan is the only significant factor in determining the non-interest income of CIMB Bank whereas bank size and inflation are the significant factor determining the non-interest income of RHB Bank. This study finds that each bank has their unique determinants of non-interest income. Both in the long run and short run the determinants of non-interest income differ between CIMB Bank and RHB Bank. The determinants of non-interest income differ between the banks may be due to policy of the banks towards non-interest business or the types of noninterest products the banks involved in. The findings are consistent with the industry expert opinion where banks are increasing their share of non-interest income in the areas which they have additional strength and competitive advantage 2017 Thesis https://etd.uum.edu.my/7633/ https://etd.uum.edu.my/7633/1/s816190_01.pdf text eng public https://etd.uum.edu.my/7633/2/s816190_02.pdf text eng public http://sierra.uum.edu.my/record=b1698750~S1 other masters Universiti Utara Malaysia Aisha, Ismail, Rahila Hanif, Sadaf Choudhary & Nisar Ahmad. (2015). Income Diversification In Banking Sector of Pakistan: A Blessing or Curse: The Journal of Commerce 7, 11-22. Abdelaziz Hakimi, Helmi Hamdi & Mouldi Djellassi.(2012).Modelling Non-Interest Income At Tunisian Banks:Asian Economic and Financial Review,2(1),88-99. Anthony Saunders, Markus Schmid & Ingo Walter.(2014).Non-Interest Income And Bank Performance: Is Bank’s Increased Reliance On Non-Interest Income Bad?” Swiss Institute of Banking and Finance, Working Paper on Finance No.2014/17 Busch, R & Kick, T. (2009). Income Diversification In The Germany Banking Industry, Deutsche Bundesbank Discussion Paper Series 2 : Banking and Financial Studies. Basil, Senyo Damankah, Olivia Anku-Tsde & Albert Amankwaa.(2014).Analysis of Non-Interest Income of Commercial Banks in Ghana: International Journal of Academic Research in Accounting, Finance and Management Science, 4(4), 263-271. Boyd, Levine R. & Smith, B.D. (2001). The Impact Of Inflation On Financial Sector Performance : Journal of Monetary Economics 47, 221-248. Baltagi, B.H.(2012).Econometric Analysis of Panel Data, 4th Edition, New York: John Wiley and Sons Press. Celine Meslier, Ruth Tacneng & Amine Tarazi.(2014).Is Bank Income Diversification Beneficial ? Evidence From An Emerging Economy: Journal of International Financial Markets Institutions and Money, 31, 97-126. Chiorrazo, V, Milani & C.Salvani, F. (2008). Income Diversification And Bank Perfomance: Evidence From Italian Banks: Journal of Financial Service Research, 33,181-203. Craigwell, R. & Maxwell, C. (2006).Non- Interest income And Financial Performance At Commercial Banks In Barbados: Saving and Development, 3(1), 309-328. Coakes & S.J.Steed. (2007). SPSS Analysis Without Anguish, Version 7, 7-5 EU Bank’s Income Structure, (2000), European Central Bank. Gurbuz,A.O., Yanik, S, & Ayturk,Y.(2013). Income Diversification And Bank Performance: Evidence From Turkish Banking Sector: Journal of BSRA Banking and Financial Markets, 7(1), 9-29. Huang, L.W., & Chen Y.K (2006). Does Bank Performance Benefits From Non-Traditional Activities ? A Case of Non-Interest Income In Taiwan Commercial Banks: Asian Journal of Management and Humanity Sciences, 1(3), 359-378. I Gusti, Ngurah Agung. (2004). Time Series Data Analysis Using E-Views , John Wiley & Sons (Asia) Pte Ltd, Singapore. Joon, Ho Hahm, (2008). Determinants and Consequences of Non-Interest Income Diversification of Commercial Banks in OECD Countries : Journal of International Economic Studies, 12 ,1-32. Josephat, Mboya Kiweu.(2012). Income Diversification In The Banking Sector and Earnings Volatility: Evidence from Kenyan Commercial Banks, Kenya Bankers Association Centre for Research of Financial Markets and Policy. Kevin J., Stiroh. (2006).A Portfolio View of Banking With Interest and Non-Interest Activities: Journal of Money, Credit and Banking , 38 (5), 1351-1361. Kunt, Huizinga, H.( 2010). Bank Activity and Funding Strategy : The Impact On Risk And Return : Journal of Financial Economics 98, 625-650. Karim & Gee, C.S. (2007). Off-Balance Sheet Activities And Performance Of Commercial Banks in Malaysia: The ICFAI Journal of Financial Economics, 5(4), 67-80. Kwast, Myron.(1989).The Impact Of Underwriting And Dealing On Bank Returns and Risk: Journal of Banking & Finance, 13, 101-125. Li Li & Yu Zhang.(2013). Are There Diversification Benefits Of Increasing Non Interest Income In The Chinese Banking Industry? : Journal of Empirical Finance 24,151-165. Merton, R.C., & Bodie, Z (1992). On The Management Of Financial Guarantees. Financial Management 21, 87-109. Mishkin, F.S. (2007). The Economics Of Money, Banking and Financial Markets, 8th Edition, Pearson Education Inc. USA. Mercieca,S., Klaus Schaek & Simon Wolfe. (2007). Small European Banks: Benefit From Diversification : Journal of Banking and Finance 37, 1975-1998. Markus Brunnermeier, Gang Dong & Darius Palia.(2010).Bank’s Non-Interest Income And Systemic Risk, Princeton University, NJ, USA. Nguyen My, Michael Skully & Shrimal Perera.(2012).Bank Market Power And Revenue Diversification: Evidence From Selected ASEAN Countries: Journal of Asian Economics 22(4), 897-912. Pennathur , A.K & Subrah, M.V. (2012).Income Diversification and Risk: Does Ownership Matter ? An Empirical examination Of Indian banks: Journal of Banking and Finance, 36(4), 2203-2215. Robert, De Young & Karin Roland. (2001).Product Mix and Earning Volatility At Commercial Banks: Evidence From A Degree Of Leverage Model: Journal of Financial Intermediation, 10,54-58. Robert, DeYoung & Tara Rice. (2004). Noninterest Income and Financial Performance at US Commercial Banks: Financial Review, 39,101-127. Rogers, K. & Sinkey Jr. F.J. (1999). An Analysis Of Non-Traditional Activities At US Commercial Banks :Review of Financial Economics 8, 25-29. Robert Webb, Kumbirai Mabwe & Kalsoom Jaffar. (2014). Changing Bank Income Structure: Evidence From Large UK Banks: Asian Journal of Finance & Accounting 6, 195-215. Robert F. Engle & C.W.J.Granger. (1987). Co-Integration And Error Correction: Representation, Estimation and Testing :Econometrica 55(2), 251-276. Rifat Gorenor & Sungho Choi.(2013).Risk, Return and Income Mix At Commercial Banks: Cross Country Evidence: Journal of Applied Business & Economics 14(3), 123-152. Sherene, A. Bailey Tapper.(2010).Non-Interest Income, Financial Performance & The Macro Economy: Evident on Jamaican Panel Data, Financial Stability Department, Bank of Jamaica. Smith, R., Staikouras C. & Wood G. (2003).Non-Interest Income And Total Income Stability, Bank of England, Working Paper No 198. Sanya, S. & Wolfe S. (2010).Can Bank In Emerging Economies Benefit From Revenue Diversification? International Monetary Fund, Washington DC. Stiroh, Kevin J.(2002).Diversification In Banking Is Non Interest Income The Answer?, Federal Reserve Bank of New York, No 154. Sarath Delpachitra & Laurence Lester.(2013).Non Interest Income : Are Australian Banks Moving Away From Their Traditional Business : Economic Paper 32(2),190 -199. Tortusa, Ausina, E. (2003). Non-Traditional Activity and Bank Efficiency Revisited: A Distributional Analysis For Spanish Financial Institutions: Journal of Economics and Business, 55, 371-395. Walter Enders. (1996). Rats Handbook For Econometrics Time Series, John Wiley & Sons Inc. New York, NY, US

Determinants of non-interest income in Malaysian banking industry : a comparative analysis on CIMB and RHB bank

Similar Items