The relationship between risk and return and banks income structure

Abstract

The present study investigates the effect of interest and non-interest activities on return and the risk of some Iranian banks over the period of 2006-2011 using regression analysis. The paper uses three independent variables where the first one is interest income and the second one is the commission fee income and the third one is obtained as a difference between other non-interest incomes with commission fee. There are three dependent variables including risk, return on investment, and return on equity, leading us to set up three regression analysis. The result of the study indicates that interest based activities have a meaningful relationship only with bank return. And the non-interest based activities have a meaningful relationship with bank risk and return on equity.