  This paper analyzes the relation between bank profit performance and business
models. Using a machine learning-based approach, we propose a methodological
strategy in which balance sheet components' contributions to profitability are
the identification instruments of business models. We apply this strategy to
the European Union banking system from 1997 to 2021. Our main findings indicate
that the standard retail-oriented business model is the profile that performs
best in terms of profitability, whereas adopting a non-specialized business
profile is a strategic decision that leads to poor profitability. Additionally,
our findings suggest that the effect of high capital ratios on profitability
depends on the business profile. The contributions of business models to
profitability decreased during the Great Recession. Although the situation
showed signs of improvement afterward, the European Union banking system's
ability to yield returns is still problematic in the post-crisis period, even
for the best-performing group.
