Table 8 Matrix correlation of...

Table 8

Matrix correlation of determinants of the excess of NPLs

Correlation matrix	Inefficiency	NPLs best practice	NPLs ratio	Tier 1 ratio	ROA	Loans growth ratio	Cost-to-Income ratio	GDP growth	Size
Inefficiency	1
NPL best practice	−0.0153	1
NPLs ratio	0.5762*	0.7476*	1
Tier 1 ratio	0.1137*	0.0581*	0.0749*	1
ROA	−0.1093*	−0.4121*	−0.3972*	0.0625*	1
Loans growth ratio	−0.1470*	−0.1786*	−0.2071*	−0.0985*	0.0836*	1
Cost-to-Income ratio	0.1050*	0.0461*	0.0861*	0.0317*	−0.1271*	−0.0794*	1
GDP growth	0.0384*	−0.2181*	−0.1479*	−0.0121	0.2116*	0.1068*	0.0015	1
Size	−0.0506*	0.0720*	0.0436*	−0.2063*	−0.2700*	0.007	−0.0607*	−0.0526*	1

Correlation matrix	Inefficiency	NPLs best practice	NPLs ratio	Tier 1 ratio	ROA	Loans growth ratio	Cost-to-Income ratio	GDP growth	Size
Inefficiency	1
NPL best practice	−0.0153	1
NPLs ratio	0.5762*	0.7476*	1
Tier 1 ratio	0.1137*	0.0581*	0.0749*	1
ROA	−0.1093*	−0.4121*	−0.3972*	0.0625*	1
Loans growth ratio	−0.1470*	−0.1786*	−0.2071*	−0.0985*	0.0836*	1
Cost-to-Income ratio	0.1050*	0.0461*	0.0861*	0.0317*	−0.1271*	−0.0794*	1
GDP growth	0.0384*	−0.2181*	−0.1479*	−0.0121	0.2116*	0.1068*	0.0015	1
Size	−0.0506*	0.0720*	0.0436*	−0.2063*	−0.2700*	0.007	−0.0607*	−0.0526*	1

Note(s): The dependent variable is alternatively represented by the inefficiency of the credit process, (i.e. the excess of NPLs over the best practice), the level of best practice NPLs (i.e. the level of NPLs without inefficiency) and the NPLs actually observed. The independent variables are TIER1_i,t−1 capital ratio; ROA_i,t−1 is the return on asset ratio between profit before taxes and total assets; GLGR_i,t−1, i.e. the gross loan growth rate; Cost-to-Income_i,t−1 is the cost-to-income ratio measured by operating expenses over the intermediation margin; GDP growth_t−1 captures the macroeconomic conditions or business cycle for Italy; Size_i,t−1 is the natural logarithm of total assets; *denotes the statistical significance at 5% level

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