E. J. Ourso College of Business, LBA Partner on Banking Study
December 2, 2015
BATON ROUGE – The Louisiana banking industry has undergone significant consolidation over the past five years, with a number of small- and medium-sized banks being absorbed by their larger counterparts.
In the five-year period covered by the report, large banks domiciled in Louisiana
increased their market share of total assets from 23 percent in 2010 to nearly 50
percent by 2015. On the opposite end of the spectrum, small banks dropped in that
same period from 49 percent to 33 percent. Still, the industry remains competitive,
as all bank types continue to show strong performance figures.
This data is collected in a recent report by the LSU E. J. Ourso College of Business and the Louisiana Bankers Association – the first joint, periodic report between the two on Louisiana bank market conditions. The study, which is the first in a planned series of annual reviews, was conducted by Joseph Mason, professor of banking at LSU, and LSU Finance Ph.D. student Prateek Sharma.
Mason said that this is the beginning of a series of market reports combining the “market knowledge of the Louisiana Bankers Association with the analytical insight of faculty at the E. J. Ourso College of Business.” He added that LSU looks forward to partnering with the business and financial services community in the future on similar projects.
The study concluded that medium-sized banks have been more effective in terms of interest and non-interest income as a percentage of total assets. However, given their lower profit margins, any acquisition by a large bank would be primarily based on market share rather than performance.
Conversely, small banks have a high profit margin and return on equity, which makes them an attractive acquisition target but at a high price due to their superior performance.
Read the full study.
About the Department of Finance
The Department of Finance is a Chartered Financial Analyst (CFA) Program Partner and a Certified Financial Planner (CFP) Board-Registered Program that offers high quality curricula to undergraduate and graduate students interested in careers in corporate finance, asset management, real estate, insurance, banking, financial planning and business law. The department boasts internationally renowned research faculty in several areas, including derivatives, asset management, banking and spatial econometrics. The department’s Securities Markets Analysis Research & Trading Lab boasts the Bloomberg Professional service, the platform used by more than 300,000 leading business and financial professionals worldwide to make informed business decisions, and an extensive library of financial data bases including the Wharton WRDS System. Additionally, the department encourages, supports and conducts research in real estate by housing the nationally renowned Real Estate Research Institute. For more information, visit our homepage or call 225-578-6291.
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LSU E. J. Ourso College of Business