Study On The Profitability Of China’s Listed Banks

With the reform-and-opening-up policy being carried out, China’s banking industry has been developed from the mode that suits the planned economy to the new system that fits into the socialist market system. We’ve witnessed great progress not only in the bank organization, but also in financial products, financial technology and financial services. The development of China’s banking industry is rapidly, but compared with the banks with higher profitability in some of the world’s developed countries and regions, the profitability indicators of China’s banking industry still lag far behind. China’s listed banks now face a new era of competition. They not only have to compete with stronger international opponents, but also have to face higher requirements because of the gradual liberalization of the interest rate and bank customers’increasingly diversified demand. China’s listed banks are facing more intense competition, so the study of China’s listed banks profitability, in particular, the comparison with the international banks with higher profitability is necessary. It’s vital to find out the profit gap for the development of China’s banking industry. Based on this, the article decomposes ROA into interest income, non-interest income, interest expense and the proportion of operating expenses as a percentage of average total assets. The article analyses16listed banks’ average data in the period of2007-2011and makes a comparative analysis with banks with higher profitability in the USA to identify the gap between them and to identify the direction of the methods and efforts to improve China’s listed banks profitability.The analysis of consolidated revenue and expenditure targets from2007to2011shows that the listed city commercial banks were the highest ranked of China’s16listed banks in the average ROA, which stems a better job of cost control. In the listed state-owned commercial banks, China Construction Bank and Industrial and Commercial Bank were more to the top, the Bank of China and Bank of Communications got the middle rank, and Agricultural Bank of China ranked lower. In the joint-stock commercial banks, the overall profitability of China Merchants Bank and Industrial Bank were ranked better, but the gap is obvious compared to the cities listed commercial banks and state-owned listed commercial banks. In the composition of the income of China’s Hsted banks, the largest contribution to the bank profitability is still interest income. Loan interest accounted for the highest part of interest income. From the expenditure comparison with Banks with higher profitability in the United States, the expenditure targets of the listed banks in China is lower than the opponents in the United States. On the revenue side, China’s listed banks’interest income and non-interest income indicators are much lower than the banks in the United States. To improve the profitability, the listed banks in China should start from several aspects: banks should develop a business strategy that adapts to their own; adjust the business focus; improve cost management capabilities, and strengthen cost control; vigorously develop intermediary business.