Research On Earning Power Of State Commercial Banks

With fierce competition arises in domestic banking, the reforms in four state commercial banks, which take important places in Chinese financial market, have attracted more and more attentions. Due to the historic influence of planned economic system and unclear proprietary rights, the four banks have not built up a profit-aimed operation system, and pay insufficient attention to banks' earning power, though they have aimed at becoming 'true' commercial banks. However, only with enough earning power, can the four state commercial banks get enough strength to compete with those domestic joint-stock banks and foreign banks. Also with strong earning power, the four banks can attain enough profits to complement banks' capital and ensure the banks' safe operation. In the same way, with strong earning power, they can cancel large numbers of bad debts after verification to decrease NPLs to a reasonable level. Strengthening state banks' earning power will not only bring them advantages in competition, but also increase the return of state capital. It will also promote the plans of putting state banks to the market and have important meaning for Chinese financial reform.In the article, I mainly analyzed the earning power ratios of four state banks with financial analysis method. Referring to Dupont financial analysis system and four state banks' financial data and main earning power ratios in 1998-2002,1 analyzed the current status of their eaming power and those related factors, such as earning level of main business, structures of income and assets, operation fee management. Then by comparison with other domestic stock banks and world ten top banks in tier one capital, assets, pre-tax profits, cost/income ratio and pre-tax profit per employee, I found that the four banks had advantages in scale and strength, but lagged far behind other banks.Besides internal factors, the earning power of state banks is also influenced by external factors. As for the limitation of financial analysis, I also considered the influence of other related environmental factors, such as the competitive pattern of domestic banking market, restriction on cross-industries operation, policies on banks' price making right, the development of technology and web. After the analysis on internal and external factors, the four banks can make improvements in respective deficiencies. By taking all-round reform measurements, for example, optimizing their organization and management, improving traditional operation, achieving more profits in main businesses, encouraging innovation in products and services, perfecting cost management and making progress in efficiency, the state banks will strengthen their earning power and achieve competitive advantages in future.Previous researches on state banks' earning power mainly took the four state banks as a whole, neglecting the differences among them. What's more, those cited data were too old to reflect the current situation of state banks' earning power, In my thesis, I did my best to achieve analysis conclusions based on up-to-data data. But latest data is not the only innovative element in the research. Considering the common and different characters of four banks, I made thorough analysis on the earning power of each state bank respectively, discussing both different and common factors influencing each bank in detail, which was rare in previous researches.