An Empirical Study On The Impact Of Non - Interest Income And Its Structure On Bank Performance In Commercial Banks

As the Chinese financial regulatory authorities broadened banks’business scope, the major banks are expanding their businesses from traditional deposit and loan business to a variety of non-interest businesses. With the non-interest income continues to grow, the proportion of non-interest income improved substantially. The average non-interest income proportion reached 14.84%. In order to study the impact of Chinese commercial banks’ non -interest income on banks’ operating performance, we use panel data of 23 Chinese commercial banks during the year of 2007-2012 to do empirical analysis. The indicators of ROA and SHROA are used to represent banks’ operating performance. NIIs, INTA and LDR are explanatory variables. We do empirical test not only for the overall sample, but also for the three sub-categories of commercial banks. The empirical results show that:the proportion of non-interest income was significantly positively related to banks’ operating performance. Improve the proportion of non-interest income is helpful to improve the operating performance of commercial banks. Economy of scope still exists in Chinese bank industry. The diversification strategy is beneficial to improvement of operating performance. The degree of impact which non-interest income has on operating performance is related to the bank scale negatively. Non- interest income is more important for smaller banks, and they should adopt a more diversified strategy. Total asset growth rate is related to operating performance negatively. This result means that Chinese commercial banks are experiencing diseconomies of scale, and the simple pursuit of scale expansion speed can’t improve the bank’s operating performance. The banks should improve organization and management level and reduce operating costs. Loan-deposit ratio negatively correlated with operating performance, liquidity risk has a negative impact on operating performance. Loan-deposit ratio should be controlled within a reasonable range, and banks should improve risk control system. Regulatory authorities can allow universal banking businesses and create a more scientific system of regulatory indicators to guide the healthier development of commercial banks.