Analysis On The Profitability Impact Factors Of The Joint-stock Commercial Banks

In recent years, the rise of China’s capital markets lead to the financial disintermediation phenomenon. From the establishment of the short-term financing bills market, to the bond market continues to heat up; From the establishment of the stock market, to competing listing of the enterprises; From the trust industry on behalf of financial management, to the financial management of bank-trust cooperation; From the single bank deposit products, to the endless stream of bank debt products, etc., are all marked the evolving of the financial disintermediation phenomenon. The financial disintermediation phenomenon will make the funds must intermediation by the banking industry become less and less, the deposits pressure of the banking sector will become increasingly large, so competition between the various banks will be more significant. In addition, the bank deposit and lending rates are gradually liberalized by the state, regulations allows banks to fluctuate interest rates according to the base rate, which marks the interest rate market entered a substantive stage. The market-oriented of interest rate undoubtedly also makes banking competition more intense, especially for small and medium-sized banks, they will face greater risk.Joint-stock commercial bank’s own comprehensive strength and competitiveness is far insufficient in an increasingly competitive banking market. On the one hand, China’s five state-owned commercial banks in the banking industry, have been presented with a unique advantage, the five banks not only have extremely strong size of asset, and also enjoy preferential financial policy, such as the bank of China’s foreign business, foreign currency exchange, they are subject to state support and licensing. In addition, due to the innate disadvantage on the number of outlets and customers scale, the deposits drain endurance of the joint-stock commercial bank, also has a significant gap compared to the five state-owned banks. On the other hand the gradual opening up of financial markets makes many high quality foreign banks enter the domestic financial sector gradually. The advantages of the foreign banks are significant compared to domestic joint-stock commercial banks. Firstly, they have long history, large-scale and good credit in the international financial markets. Secondly,they have strong ability of sheet business and foreign business. Thirdly, their ability to control financial risks, develop markets are far stronger than our domestic joint-stock commercial banks. From the current state of development, the foreign banks have not caused substantial material impact on our local banks, but in the long run, with the increasing liberalization of the operating policies to the foreign banks, in the future foreign banks might be a great threat to the development of China’s banking industry.It is especially important to enhance the competitiveness and overall strength of China’s joint-stock commercial banks because of the face of fierce competition and a huge pressure. First of all it is necessary to enhance the profitability of the commercial banks, because the commercial banks is based on the fundamental profit in the financial markets, especially for the joint-stock commercial banks which the scale is not big enough, vigorously enhancing the profitability of the banks is imminent.Both from the theoretical or practical level, scholars have generally agreed that the financial influencing factor is the basis of factors that affect the profitability of commercial banks, and the use of financial indicators to evaluate the profitability of commercial banks is the most effective method. But for now, the most study of factors affecting the profitability of commercial banks is not comprehensive enough, the analysis of the bank’s internal financial factors is not so systemic. In response to this situation, this article will use DuPont’s financial system to systematically analyze the financial factors affecting the profitability of commercial banks.This paper is divided into four chapters on the overall structure planning:Chapter one mainly introduces background, meaning, literature survey, main content and innovation of the thesis that studies of this selected title to click for the introduction.Chapter two firstly elaborate the concepts, principles and ideas of the DuPont analysis, and then build the DuPont financial model of the joint-stock commercial banks. Then through the decomposition of joint-stock commercial banks’ interest yield, we systematically and comprehensively export financial factors affecting the joint-stock commercial bank profitability, they are capital adequacy, deposit and lending business capacity, intermediate operational capacity, operational efficiency, asset quality, liquidity conditions, banks’ size and income tax situation, then, we make theoretical analysis and hypotheses on these financial factors.Chapter three is the empirical analysis. According to the above DuPont financial model of the joint-stock commercial banks, we specifically select nine financial indicators as the independent variables,they are the proportions of interest earning to total assets、interest cost to total assets、overhead to total assets、other earning to total assets、loan loss ready to total assets、income tax to total assets、 liquidity to total assets、equity capital to total assets and total assets. We use a panel data of10national previous ranking joint-stock commercial banks in2003-2010as the data samples, and then establish an empirical model to analyze the impact of various factors on the profitability of commercial banks. Finally, we draw the conclusions of this study with the combination of theoretical analysis of the second chapter.Chapter four:on the basis of analysis of financial factors affecting the profitability of the joint-stock commercial banks, this paper presents some proposals:improve deposit and loan business, innovate intermediary business, enhance the quality of bank assets, improve bank capital utilization efficiency and so on.