The effect of COVID-19 on revenue diversification, profitability and risk of banks in Zambia Kayombo Kelvin Mukolo1, Kamwengo Grace Lusana2, Katebe Moses3, Sakutemba Elisha4 1School of Business, ZCAS University, Dedan Kimathi Road, Lusaka, Zambia, Email id: kelvin.kayombo@zcasu.edu.zm 2School of Business, ZCAS University, Dedan Kimathi Road, Lusaka, Zambia, Email id: grace.kamwengo@zcasu.edu.zm 3School of Business, ZCAS University, Dedan Kimathi Road, Lusaka, Zambia, Email id: moses.katebe@zcasu.edu.zm 4School of Business, ZCAS University, Dedan Kimathi Road, Lusaka, Zambia, Email id: elisha.sakutemba@zcas.edu.zm Online published on 31 January, 2023. Abstract The aim of this study was to evaluate the effect of the COVID-19 pandemic on revenue diversification and performance of banks in Zambia. The study was quantitative in design. Herfindahl Hirschmann Index measures for each bank to account for diversification between interest and non-interest activities were constructed, while the Risk Adjusted Return on Average Assets to measure bank profitability and the Z-Score to measure bank income volatility were computed. SPSS’s One-way repeated measures ANOVA was then used to analyse panel data from 16 of the 18 commercial banks in the country. The study concluded that there was no statistically significant difference in bank revenue diversification following the outbreak of COVID-19 in Zambia. With respect to bank performance, the study found that there was a statistically significant increase in bank profitability as measured by RAROAA in the aftermath of the pandemic. Similarly, the study found that there was a statistically significant increase in bank income volatility following the COVID-19 pandemic. Although bank profitability increased in the pandemic era, income volatility also increased thereby, exposing banks in the country to insolvency risk. The policy implication is that the Bank of Zambia should encourage banks to diversify their non-interest income sources to enhance their capacity to withstand major disruptions caused by natural and man-made disasters. Top Keywords Bank revenue diversification, COVID-19, Income volatility, Risk adjusted return on assets, Zambia. Top |