| Commercial Bank’s profit model is the comprehensive reflection of both thebank’s external institutional environment and internal operating conditions in the fieldof the bank’s balance of payments structure, and at the same time, it is also thepremise which determines on the bank’s profit-ability, value-creative-ability, and themarket-competitive-ability. As a special industry which dealing with currency andcredit, the profitability of banks not only provides a way for its internal capitalaccumulation, but also provides a channel for improving the safety and liquidity of thebank’s assets. Furthermore, the profitability can also enhance the public confidence,thus maintaining the stability of the whole social credit system.The characteristics of profit model of China’s banking industry, by now, aremainly manifested in three aspects: to hold the interest difference as the primarysource of income, the expansion of credit scale as the main business, the separatesupervision as the major operating method. Currently, with the steps of the foundationof Shanghai FTA (free trade area), especially the formulation and implementation ofsome financial reform rules and its detailed applications like: Allowing qualifiedprivate capital to initiate the establishment of small and medium-sized financialinstitutions, improving the construction of multi-level capital market system, andsteadily promoting the process of the market-oriented interest rate reform, thecommercial bank of our country’s High Spreads Era is coming to an end. At the sametime, not only the rapidly-growing inter-bank competition, a new financial force isemerging suddenly from internet field such as Yu Ebao launched by Alibaba, HuoQitong by ChinaAMC. All these new approaches of money management haveaggravated the process of financial disintermediation, forcing commercial banksthemselves to re-examine their financial innovative capability and to adjust theirbusiness development strategy. In addition，in December of2010, the third edition ofthe Basel Agreement released by the Basel’s Financial Supervisory Commission ofBIS (bank for international settlements), which hereinafter referred to as the Basel Ⅲ,has increased the global commercial bank’s minimum tier-one capital adequacy ratio from previously required4%to6%, and promoted the minimum requirement ofcommon stock from2%to4.5%. This, undoubtedly, makes the Commercial Banks ofour country face a more stringent and tougher situation in the field of capitalconstraints regulation and supervision.The change of financial environment and current situation mentioned aboverevealed us an inspiration that we must transform China’s Commercial Bank’s currentcredit-operation-oriented profit model to another. Be deeply influenced for a long timeby the high-savings-and-high-investments-driven economic growth mode from themacro level, constrained by the indirect-financing-majored financial market structurefrom the medium level, and restrained by the control-of-interest-rate andseparate-regulation led financial system from the policy level, the original profitmodel shows a strong inertia which formulate the country’s existing profit modelitself. However, it can’t be ignored that there are some problems inherent within thiskind of model, listed those four as below:1) It is a simple model with few source of revenue, and the mainly profitability relieson the traditional deposit and loan business;2) This model develops with few kinds of intermediary business, low added value andless creativity;3) It focuses a lot on size, not efficiency. It is also lack of unified regulations, and itsintermediary business has a poor ability to raise revenue;4) Besides, electron and network technology which is widely used in our daily lifecan’t be well applied in China’s current financial operations. There is indeed a muchroom to improve the e-service level in financial area.Overall, it concludes that the transformation of Chinese commercial bank’s profitmodel has its necessity and inevitability.Based on the review of previous research and thesis, this paper proposes atheoretical framework on the transformation of profit model of China’s commercialbank, and tries to construct a whole index system for comprehensive evaluations ofthe commercial bank’s profitability. For this purpose, this paper firstly analyzes on thecurrent situation of Chinese commercial bank’s profit earning patterns, specificallyresearch into the features, causations, barriers of transformation, driving factors of theexisting profit model. Secondly, taking the United States, German and Hongkong asexample, the paper carries out a comparative analysis of commercial bank profit model between the western country and our country, and summarizes the experienceand enlightenments of the profit model of commercial banks in developed countries.After that, this paper selected15commercial banks in China (including thestate-owned banks, joint-stock banks and city commercial banks), collected sufficientdata from2005-2012among those15samples, used Stata11.0as analysis tool, andthen utilized the least square method of panel model and factor analysis to carry outthe correlation analysis on profit model and profit ability of China’s commercialbanks. Finally, the paper arrived at a conclusion as follows:1)From an overall perspective, there is a remarkable correlation in commercialbank between the profit model and profit ability, especially between the diversityprofit model and bank’s overall profit ability, the correlations shows significant andpositive;2)Among different types of commercial banks, it is found that, compared with thefour major state-owned commercial banks, the revenue from the intermediarybusiness of joint-stock commercial banks and city commercial banks played a muchmore positive role in improving the bank’s overall profit ability. Therefore, in thefuture, on the adjustment of business strategy, it is suggested that the joint-stockcommercial banks and city commercial banks could tilt towards the intermediarybusiness.3)By contrast to the traditional deposit and loan business, the development ofintermediary business contributes quite a lot in improving the operating profit, andthis trend is intensifying. This result of analysis provides some raw material andobjective basis for the necessity of the transformation of the profit model. For thecommercial banks, it is a more promising way to develop thecredit-business-and-intermediary-business-focused profit model, rather than justfocusing on the traditional deposit and loan business and profit mainly from the netinterest.4)By utilizing the factor analysis method, this paper constructs a whole indexsystem which is composed of the real profitability indicators like the all capitalearning rate, the potential profitability indicators like pre-tax per capita profit, totalassets growth rate, business revenue increase rate, and the dynamic profitabilityindicators like loan-to-deposit ratios, provisioning coverage ratios, non-performingloan ratios and cost-to-income ratios. The aggregative indicators from the whole index system can be used to monitor the bank’s abilities in different aspects include riskmanagement ability, liquidity management ability, future growth ability, asset quality,equity expansion ability, capital structure management ability, capital profitability andso on. Using this index system, the paper ranks the15samples of the commercialbanks according to their profit ability, and gets the result that the state-ownedcommercial banks lag behind the joint-stock commercial banks and city commercialbanks. Through this analysis and practice, we conclude that this index system hasguiding significance in tracking and monitoring China’s commercial bank’s overallprofitability so as to instantaneously adjust the business focus.As mentioned above, the paper stresses the necessity and inevitability of thetransformation of the profit model of China’s commercial banks. In the process oftransformation, however, we should emphasize “one center, and four basic points”.“One center” means the profit model shall transform from the extensive high-riskmodel which focus on the profit increase from traditional deposit and loan business tothe intensive diversity model which underlines much more on the profit increase fromthe intermediary business. And “four basic points” means the profit model shall baseon maintaining the current level of net interest, focus on expanding non-interestincome, be driven by enhancing innovative research and development, and beguaranteed by improving the level of risk management. Hope that the conclusions andsuggestions in this paper can provide a point of view for China’s commercial bank’sfuture strategy formulation and profit model transformation. |
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