Loan Portfolio and Performance of Bank Holding Companies in the US: 2006-2008

The paper examines loan portfolio of bank holding companies in the US during the years 2006-2008 to identify any significant differences in bank lending before and during the financial crisis. The results of the study suggest that for the largest banks there was no significant change in loan portfolio throughout 2006-8. However, for small banks, the share of real estate loans slightly increased in 2008 where as the share of consumer loans declined suggesting some possible substitution of consumer loans by real estate loans. The study also examines the relationship between loan types and overall performance of bank holding companies in order to identify any significant difference in the effect of loan on bank profitability between the years 2006, 2007 and 2008. The empirical evidence suggests that higher aggregate loans were consistently associated with lower bank performance throughout 2006-08 where as evidence for the varying effect of loan portfolio on performance throughout 2006-08 is limited.