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Real estate prices and banking performance: evidence from Canada

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  • Robert N. Killins

    (Seneca College of Applied Arts and Technology)

Abstract

Using quarterly data from 1996 through 2018, this study explores the impact of real estate prices, real estate exuberance and real estate volatility on bank profits using a dynamic panel methodology with a unique sample of Canadian banks. The change in housing prices tends to result in a positive impact on profitability (ROA and ROE), but under risk-adjusted measures of profitability, this positive impact tends to dissipate. When exuberance exists in the real estate market, this also tends to result in a positive impact on non-risk adjusted measures of profitability. Finally, this study finds that the volatility of real estate prices has little impact on the riskiness of banking profits in Canada.

Suggested Citation

  • Robert N. Killins, 2020. "Real estate prices and banking performance: evidence from Canada," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 44(1), pages 78-98, January.
    • Handle: RePEc:spr:jecfin:v:44:y:2020:i:1:d:10.1007_s12197-019-09474-8
    DOI: 10.1007/s12197-019-09474-8
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    Cited by:

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    2. Benjamin Kwakye & Chan Tze Haw, 2020. "Interplay of the Macroeconomy and Real Estate: Systematic Review of Literature," International Journal of Economics and Financial Issues, Econjournals, vol. 10(5), pages 262-271.

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    More about this item

    Keywords

    Bank profitability; Real estate; Dynamic panel data methodology;
    All these keywords.

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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