Banking companies can earn higher profits if they focus more on loan underwriting and fee income and less on cost-cutting, according to a recent study by an economist at the Office of the Comptroller of the Currency.

"Persistent positive abnormal profits appear to be driven by revenue generation, not cost control," OCC economist Karin Pafford Roland wrote in an agency working paper. "This result lends support to the argument that expansion of banking powers via insurance sales, proprietary mutual fund management, etc., will improve the profitability of bank holding companies."

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