Non-interest income and financial performance at commercial banks in Barbados

Abstract

This study discusses the trends in non-interest income at commercial banks in Barbados between 1985 and 2001, as well as investigates the determinants of non-interest income and its impact on commercial bank financial performance. The paper reveals that the incidence of non-interest income in Barbados declined over the period, contrary to the findings in Jamaica and Trinidad and Tobago as well as the wider developed world. A review of the literature and a panel data regression model confirm that the result for Barbados may be attributed to the absence of some of the factors that were pinnacle to the generation of non-interest income in developed countries, such as deregulation and technological change, especially for the development of loan securitization and credit scoring. The empirical evidence supports bank characteristics and the ATM technology as the most influential factors shaping the trend of non-interest income in the banking industry in Barbados and suggests that non-interest income is positively related to both bank profitability and earnings volatility.