Bank profitability is usually considered a relevant factor to provide the reliability of the financial system, reducing the risks associated to events of bankruptcy in this sector. In Brazil, however, there has been a great deal of discussion concerning the amount of earnings of financial institutions operating in the country, centered on the argument that such earnings are too large, becoming an excessive burden to the wealth-producing sector. For this reason, several studies have evaluated the structure, the evolution, and the determinants of bank spread, which is taken as the main variable responsible for the supposedly abnormal earnings. From the methodological viewpoint, these studies have concentrated in investigating the ex ante bank spread related to operations with free resources and they have used macroeconomic factors as independent variables. This study aims at identifying variables determining the ex post bank spread, privileging explanatory variables intrinsic to the institutions, in other words, microeconomic. The literature on determinants of banking ex post spread in Brazil presents a single previous paper, which presents poor results due to a problem of micronumerosity. To avoid such problem, our study uses data of balance sheets of banking institutions with operating credit portfolios from January 2000 to October 2009. Using a dynamic panel-data regression model, we tested nine hypotheses and we found that the level of ex post bank spread has relationships which are significant and: (i) positive with the credit portfolio risk; (ii) negative with the relative participation of the institutions in the credit market. On the other hand, we could not find statistically significant relationships between the level of ex post bank spread and: the level of coverage of administrative expenses by revenues from services rendered; the origin of the institutions' controlling capital, i.e. national versus foreign and state-owned versus private; the economy's basic interest rate; the volatility of the Sao Paulo Stock Exchange stock index.
Bank spread; Banks; Bank profitability; Financial institutions; Brazil
