Browsing by Subject "profitability"

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  • Vanhala, Juuso; Virén, Matti (2018)
    Bank of Finland. Bulletin 3/2018
    Unprofitable ‘zombie’ firms have been on the rise in Finland, both proportionately and in absolute terms, since the beginning of the 2000s. At most, they have accounted for approximately 10% of all labour and capital allocated within the corporate sector. Zombie firms can survive for years, but in the long term they must either revitalise and become profitable or exit the market. Keeping unprofitable firms on life support for extended periods of time can distort the efficiency of markets and is associated with a variety of risks. For one, the share of capital and labour allotted to zombie firms prevents these resources from being allocated more efficiently elsewhere, weakening operating conditions for profitable companies. This opportunity cost lowers productivity and weakens growth opportunities for the entire economy. Furthermore, zombie firms are generally highly leveraged and raise the risk of credit defaults and financial market disruptions. Identifying zombie firms is not entirely straightforward, however, as the classification is in itself heterogeneous and includes growing companies with weak current profitability who may, in the long term, eventually contribute to economic growth.
  • Koskinen, Kimmo (2016)
    Bank of Finland. Bulletin 2/2016
    The year got off to an uncertain start for the European banking sector, and market turbulence was strong in the first half of 2016. The uncertainty has reflected increased concerns about the growth prospects for the global economy. Rising credit risks in the energy sector, weak market liquidity and uncertainty about monetary and economic policies’ ability to support economic growth have increased market volatility. Uncertainty over global growth prospects has also focused strongly on the banking and financial sector, which is particularly sensitive to changes in the economic outlook. Although the profitability and liquidity position of the European banking sector has improved on average in recent years and capital adequacy has advanced, the banking business is facing numerous risks both in the short and the long term. Banks' long-term profitability and the sustainability of their operating models have been singled out as special causes for concern.
  • Savolainen, Eero; Tölö, Eero (2017)
    Bank of Finland. Bulletin 2/2017
    The Finnish, Swedish, Norwegian and Danish banking sectors have broadly similar strengths and weaknesses. Their profitability is strong, capital adequacy solid, and loan losses have been at historically low levels for a long time. On the other hand, the national banking sectors are large and concentrated and their systemic risks relate largely to lending to the residential and commercial real estate markets.
  • Putkuri, Hanna; Savolainen, Eero (2016)
    Bank of Finland. Bulletin 2/2016
    The current exceptionally low level of interest rates promotes price stability and economic growth in the euro area, but it also puts a strain on retail banking profitability. In Finland, the banks’ most important source of income, net interest income, is now exposed to pressures from several different directions at once. Low interest rates have compressed the spread between lending and deposit rates. At the same time, loan and deposit stocks have increased only slowly. Low interest rates have reduced customers’ debt-servicing expenditure, but may also mask risks.
  • Vanhala, Juuso; Virén, Matti (2017)
    Bank of Finland. Bulletin 3/2017
    An economy does not export products or create jobs – firms do. These are, however, very heterogeneous and often far from the average. Only the few 'superstars' of high productivity and profitability stand out distinctively in the large mass. A situation in which a few successful firms deviate strongly from the mass may distort the picture of an average firm and lead to erroneous conclusions about the condition of the corporate sector. However, a characteristic common to all firms is that success is reflected in wages and employment, even if in the export sector, the effect is typically smaller. Economic policy should pay more attention to the considerable heterogeneity of firms.
  • Koskinen, Kimmo; Manninen, Otso (2019)
    Bank of Finland. Bulletin 2/2019
    The profitability of the European banking sector is weaker than 10 years ago or compared with banks outside the EU. However, the average figures conceal market differences among EU banks.