The Cross Section of Bank Value
78 Pages Posted: 5 Apr 2017 Last revised: 5 Jul 2021
Date Written: March 2017
We study the determinants of value creation in U.S. commercial banks. We develop novel measures of individual banks’ productivities at collecting deposits and making loans, which we relate to bank market values. We find that deposit productivity is responsible for two-thirds of the value of the median bank and most variation in value across banks. Variation in productivity is driven by differences across banks in technology, customer demographics, and market power. We also find evidence of synergies between deposit-taking and lending. Our findings suggest that there is significant heterogeneity in banks’ abilities to capture value by manufacturing safe assets.
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