Giuseppe Lusignani

A Long-Term Approach to Italian Banks’ Profitability: Paradise Lost?

The paper examines the long-term profitability of the Italian banking system (1965-2011), which has three interesting features: it has always been oriented to traditional intermediation; it underwent a significant process of privatization, consolidation and modernization; it proved to be very robust when the financial crisis burst. However at present, both Roa and Roe have reached the low levels of previous troughs. In a sense, the Italian banking system seems to be again at square one. Our analysis shows that the most important driver of profitability has been the decline of the margins since the late 1980s and that a reversal of this trend does not seem likely in the foreseeable future. Therefore, future rebounds of profitability can only come from significant actions of rationalization, which apparently have not been delivered in the past wave of mergers.

Bank Lending and the Securitisation Process: A Comparative Analysis

The role and the importance of banks in providing funds to the economy has been analysed from different perspectives with various possibilities for the future of bank lending. On the one hand, the long-term evolution of financial systems through securitisation and financial innovation processes may decrease the importance of banks in the financing of the economy. The introduction of new financial instruments traded in efficient open markets increases, for borrowers, the possibility of raising funds direct from private and institutional investors. Firms with high-quality standing in the market are more capable of substituting bank loans with new financial instruments which are subscribed directly by investors and are traded in efficient secondary markets. This may result in a long-term reduction in bank lending and an increasing role for financial markets in providing funds to the borrowers (Rybczynski 1984).