DID THE COVID-19 PANDEMIC IMPACT POSITIVELY ON PERFORMANCE OF DIVERSIFIED BANKS? A CASE OF PAKISTAN

Abstract

COVID-19 pandemic has remarkably affected the performance of financial institutions due to constriction of economic activity, slowdown of developmental projects and bankruptcy of business entries. Therefore, it is necessary to bring fresh evidence on performance of diversified banks during the crisis period. This study aims to investigate the impact of COVID-19 pandemic on relationship of banks diversification and performance in Pakistan from 2015-2023. Using the GMM approach, to avoid statistical biasness, profit-diversification link is tested before and during the outbreak of pandemic. The results indicate that COVID-19 has positively impacted the performance of banks’ income from non-interest activities. The findings are consistent with recent studies on banking companies during the pandemic. The results of study have implications for policy makers, investors and regulatory offices. Banks with multiple sources of income have survived better during the lockdowns despite the decline in the conventional interest based income.