A Research Of Micro Factors To Affect Profitability Of Chinese Listed Banks

The purpose of this paper is to discover micro factors that affect the profitability of Chinese listed banks. The paper firstly describes the operating conditions of commercial banks these years with statistical description method. Secondly, the paper uses factor analysis approach to find the factor structure of profitability on the basis of operating conditions of banks. It is found that some internal factors of banks may explain the profitability of Chinese listed commercial banks. Thirdly, the paper uses balanced panel data during2007-2011and the LS method to analyze12Chinese listed commercial banks empirically. It is found that the profitability is related to the internal factors which are selected in the factor structure according to the theory. The empirical results show that net interest spread, the proportion of non-interest income ratio and asset size are related to return on assets significantly and positively; the cost to income ratio and the percentage of non-performing loan are related to the return on asset significantly and negatively. Bank managers can take some effective measures to improve the profitability of Chinese commercial banks according to the analysis of empirical outcome. Chinese banking sector should not only sustain stable net interest spread but also explore non-interest income business to improve the profitability. Furthermore, Chinese banks are ought to determine reasonable asset size to reach economies of scale and economies of scope. Lastly commercial banks of China should improve the level of cost control and risk management to promote the profitability.