Loan Growth Strategies and Income Smoothing in Central European Banks

Dorota Skała

Abstract


In this paper, we analyse the process of income smoothing in Central European banks in the context of expansion strategies of banks. Using a sample of 216 banks in the period 2003–2014, we demonstrate that income smoothing is a strategy most pursued by low-growth financial institutions. This result is particularly visible when the relative expansion rate at local markets is taken into account. High-growth banks are likely to have less foreseeable income streams, loan volumes and loan quality. As income smoothing is a long-term process, the lack of predictability could make forward-making reserve policies more challenging.


Keywords


income smoothing; Central European banks; loan growth

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References


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DOI: http://dx.doi.org/10.17951/h.2018.52.1.161
Date of publication: 2018-06-20 09:41:11
Date of submission: 2017-06-06 16:20:29


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