Study On Determinants Of Profitability Of Listed Commercial Banks

With the economy of China entering a period of new normal, business environment of the commercial banks which are the core of the economic and financial operation has changed profoundly, and the era of high-speed development and high profitability is over. At the same time, influenced by the continuous interest rate liberalization, the rapid internet finance rising and strict capital regulation, commercial banks’profit growth dropped down, and net interest margin narrowed. And then, commercial banks’performance declined. In this background, this article reviews the domestic and foreign literature related to commercial banks’profitability. According to the literature review, this article divides factors that will affect profitability of commercial banks into external factors and internal factors. Then it analyzes the effect of each factor on the profitability of commercial banks in China with relevant theories.After the theoretical analysis, this article uses data of 13 listed commercial banks in China from 2009 to 2014 and conducts the empirical regression using panel data model in which ROA, ROE and NIM are explained variables and factors that affect the profitability of listed commercial banks are explanatory variables. The empirical findings suggest that both economic growth and inflation have a positive impact on profitability of listed commercial banks in China during the period under study. Industry concentration and profitability of commercial banks are positively correlated, while market capitalization and profitability of commercial banks are negatively correlated. The results suggest that size and credit risk are negatively related to commercial banks’ profitability, while capital strength, management efficiency and non-interest income have positive impact on commercial banks’profitability. Finally, according to the empirical results and the specific situation of the commercial banks in China, this article provides suggestions to improve profitability of commercial banks under the new economic situation.