The recent financial crisis has induced firms to turn increasingly to financing sources other than bank credit, and banks to boost their income from non-lending services.
This paper provides some evidence concerning possibility and convenience for Italian banks to expand the supply of financial services to firms by examining the placement market for Italian corporate securities in the period 2000-2016. This market offers Italian banks considerable opportunity for expansion as their current share amounts to a third of total placements. In the last decade the ratio of total placement fees to total interest income of Italian banks slightly rose. Returns diminished progressively until 2008 and were then virtually unchanged in the following years; the decrease was less than that in returns on loans or on securities holdings.
When firms entered the stock and bond markets, bank credit was partially crowded-out and interest rates dropped for both first-time issuers and risky firms. However, when banks also played a major role both in placing corporate issues and in financing corporate issuers, lending relationships did not weaken.
