The Research On Performance Of Commercial Banks Of China Based On EVA

The performance of commercial banks of China is related to the evaluation of banks'competition power and the ability to meet challenge while domestic banks'market opens to the world. Evaluating banks'actual performance scientifically becomes important. This thesis try to research the application of EVA index in banks and the ways that how to improve banks'performance.EVA is net profit after subtracting all cost of capital that includes debt cost and equity cost. This thesis proves that EVA has a positive correlation with banks'value, and then discusses the necessity and feasibility of applying EVA in commercial banks of China, according to the experience of foreign banks. The emphasis of the EVA method is to calculate the value of EVA. Considering the particularity of commercial banks of China, the thesis then educes the model of EVA that is applicable to domestic banks by establishing three variables like NOPAT,WACC and TC with some adjustment from the basic model of EVA. Then the performance of the given 13 banks during year 2002 and 2005 are calculated. It shows that when cost of capital is considered, the performance of domestic commercial banks is bad, and the benefits of shareholders are more or less destroyed.The aim of this research is not only to calculate absolute data and relative data, but also to find out the basic factors that drive EVA of banks, so that we can make some countermeasures. The thesis chooses factors from microcosmic point of view, emphasize on size of asset,quality of asset,management of asset,operation efficiency,innovation and management of capital. The demonstration proves that there are three main factors influence EVA evidently, such as quality of asset,management of asset and management of capital.Then, some corresponding suggestions are proposed. First, banks should actualize stratagem operation according to EVA. Second, banks should increase income by improving quality of asset,strengthening management of asset and exploiting operation which create value for banks. Third, banks should reduce cost of capital by emphasizing consciousness of cost of capital and optimizing capital structure.