An Analysis of the Behaviour of Cooperative and Joint Stock Banks in Italy

An extensive theoretical and empirical literature acknowledges the crucial role of cooperative banks in promoting local development. The history and peculiarities of the cooperative model seem, in fact, to make this type of bank particularly active in lending to families and SMEs. This study focuses on the Italian banking system, comparing two kind of banks, banche Popolari – a particular type of cooperative bank in Italy – and joint stock banks, to investigate differences in the behaviour of such banks. In particular, we analyse a sample of 147 Italian banks over 2005–2009, focusing on the profit and loss account margins, credit quality and capital adequacy of these two institutional forms. The research concludes that cooperatives pay for their attitude to supporting SMEs with a lower credit quality, and they counterbalance this by showing higher capitalisation and higher profitability in terms of the net interest margin.