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Determinants of risk, profitability and default probability of Russian banks

Author

Listed:
  • Bekirova, Olga

    (Russian Presidential Academy of National Economy and Public Administration, Moscow, Russian Federation)

  • Zubarev, Andrey

    (Russian Presidential Academy of National Economy and Public Administration, Moscow, Russian Federation)

Abstract

In this paper, based on quarterly data on the financial statements of Russian banks for the period from mid-2013 to the end of 2021, using econometric methods of analysis, we estimated the factors that affect both the probability of bank default as well as other indicators of its activity — risk and profitability. The results obtained showed that balance sheet ratios are significantly correlated with the probability of bank default, its risk of insolvency, and profitability. Asset quality, a bank’s size, a capital ratio, and liquidity creation are important determinants of these bank’s characteristics. The insolvency risk (measured as a Z-score), in turn, is significantly negatively correlated with the probability of default and profitability (ROA).

Suggested Citation

  • Bekirova, Olga & Zubarev, Andrey, 2023. "Determinants of risk, profitability and default probability of Russian banks," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 71, pages 20-38.
    • Handle: RePEc:ris:apltrx:0476
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    banking sector; banking license revocation; default; insolvency risk; Z-score; return on assets; return on capital; liquidity creation; Bank of Russia;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation

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