Analysis On The Factors Of Profitability Of China’s Listed Commercial Bank

The profitability is the premise of sustained and stable development for commercial banks as profit-making financial institutions. It is not only an effective way of Capital accumulation for commercial banks, but also an indispensable condition to attract investors. Besides profitability to some extent reflects the banks’ ability to resist risks and is a strong guarantee for bank’s depositors. It can be said that profitability is one of the pillars of survival and development for banks. With the gradual deepening of economic globalization and the continuingly opening up of China’s financial market in recent years, foreign banks continuously come into the Chinese market, giving the listed commercial banks a great impact. In this context, the commercial banks have taken a lot of measures to improve profitability such as introducing foreign investors, optimizing corporate governance, cross-regional operating, and etc. In addition, since the listing of Shenzhen Development Bank, China’s commercial banks have also turned to the capital market. By the end of2011, there have been16commercial banks in China listing in the stock market. This is not only conducive to the listed commercial banks to expand the scale of capital, but also helpful to improve the commercial bank’s Profitability. Even so, there is still a wide gap between the profitability of China’s listed commercial banks and the major international commercial banks. In addition, with the acceleration of the marketization of interest rate and the deepening of financial disintermediation, the traditional profit-making model of China’s listed commercial banks faces great challenge. Such situation urges each listed commercial banks to transform business model and improve profitability.The purpose of this research is to put forward some suggestions to improve its profitability through the analysis of the factors that affect profitability of listed commercial banks. This is not only beneficial to find out the deep-seated reasons for restricting its development for the listed commercial banks, to analyze the strengths and weaknesses of the banks so as to formulate development strategies to deal with the increasingly fierce competition in the industry, but also be able to effectively supplement and improve the comprehensive evaluation system of commercial banks.This article firstly defines the concept of the profitability of commercial banks and lists some indicators to measure the profitability of commercial banks. And then it analyzes the profitability of China’s listed commercial banks from such aspects as ROA, ROE, NIM, NIR, NP and TA. Subsequently, the paper points out the existing problems in its profitability such as low intermediate business income, weak cost control ability, diseconomies of scale, low asset quality and high asset-liability ratio. Chapter3divides the factors that affect the profitability of listed commercial banks into three levels, namely the macroeconomic level, industrial level and banking level. The macroeconomic factors include economic cycle and inflation. The industrial factors include banking market structure and financial market structure and banking factors consist of asset size, asset quality, capital adequacy, business structure, operational efficiency, capital structure and the structure of property rights. Then it analyzes the effect of each factor that mentioned above on the profitability of China’s listed commercial banks respectively. Based on the research results at home and abroad, Chapter4chooses relevant indicators to conduct regression analysis of the factors affecting the profitability of listed commercial banks in China using the panel data model. The result says that only seven among all factors can pose significant impact on the profitability of the listed commercial banks. They are gross domestic product, consumer price index, market share, financial market structure, asset quality, operational efficiency and capital structure. At last, the article gives some recommendations to improve the profitability of the listed commercial banks from six aspects, that is controlling the size of banks, improving the asset quality, developing the intermediate business, controlling the costs, adjusting the capital structure, and making use of the capital market.