Work

Development banks: Distinctiveness and heterogeneity of financial performance

Year: 2025

Type: article

Abstract: This paper offers a comprehensive analysis of financial performance of development banks encompassing profitability, cost efficiency, liquidity, loan quality, loan loss provisioning and capital adequacy. We examine differences in financial performance between development and conventional banks and extend the analysis to study the relationship between financial performance and heterogeneity within the development banking sector. Heterogeneity in bank size, operational focus, level of ownership and geographical scope of operation are shown to have an influence on financial performance of development banks. Moreover, there are notable differences based on their specific mandates. Development banks following narrow mandates tend to lack cost efficiency and experience worse loan quality, provisioning adequacy and capital adequacy compared to their broadly mandated counterparts.

Source: International Review of Economics & Finance

DOI: 10.1016/j.iref.2025.104716

Authors: Jan Porenta, Vasja Rant

Institution: University of Ljubljana

Language: English

Topic: Banking stability, regulation, efficiency

Subfield: Finance

Field: Economics, Econometrics and Finance

Domain: Social Sciences

Open Access status: gold

Estimated APC paid: $1,930

Funder: Javna Agencija za Raziskovalno Dejavnost RS