Determinants of real estate bank profitability

Abstract The aim of this study is to examine how bank-specific, industry-specific and macroeconomic factors affect the profitability of 108 real estate banks from the U.S., the U.K. and Germany over the period from 2000 to 2014. The literature describing the profitability determinants of real estate banks is almost nonexistent. Similarly, there exist very few papers that investigate the impact of the recent financia crisis on bank profitability. To account for the effects of the recent financial crisis, we separately considered the years before and during the crisis. We conclude that bank-specific characteristics related with credit and liquidity risk, operational efficiency, the growth of total loans, opportunity cost and implicit interest payments explain real estate bank profitability. The Lerner index, interest rate volatility and GDP also has a significant impact on profitability. Finally, our results show a significant impact of real estate price growth on real estate bank profitability.