Bank Strategy and Its Performace

This paper aims to discover efficient bank strategies that are able to positively influence its performance. Considering banking activity to be rather challenging and strictly regulated in countries, Russia, in turns, has genuinely outstanding peculiarities of its banking system. Based on this, the paper examines the phenomenon of massive Russian banks failure in the period from 2013 to 2019 in order to identify which strategic decisions of banks regarding asset and liabilities portfolio structures lead a credit organization to perform sufficiently or poorly. The analysis method consisted in application of logistic regression on the panel data containing financial indicators of 896 commercial banks. As a result, the hypothesis that default probability of a bank is affected by its strategic focus of forming asset and liabilities portfolio was statistically confirmed. Moreover, it was found out that the concentration of a bank’s activity on issuing loans to individuals and to other banks, as well as on raising commercial deposits and interbank loans has a positive effect on bank performance. The prevalence of loans to legal entities and deposits of individuals on a bank’s balance sheet, in turns, increase the chances of failure. These new insights for financial and banking spheres have enabled the paper to cover the research gap relating to the absence of critical assessment of various bank strategies.