An Empirical Research On The Impact Of The Income Structure To The Performance Of Commercial Banks

No formula lasts forever. After the rapid development of the “Golden Decade”,Chinese Banking Industry ushered in the “winter”. Recently, with the cancellation of the restrictions of the deposit and lending interest rates and the development of the market-oriented process of interest rates, Chinese banking industry is faced with the double pressure on capital adequacy ratio and return on capital. The profitability of banks is gradually worsening and the profit growth falls while the traditional debt-credit business is unable to satisfy the needs of commercial banks’ development.Therefore, in order to satisfy customers’ growing diversified and personalized financial needs and achieve the sustainable development of the banking business scale and profitability, it’s necessary for commercial banks to expand business types and adjust income structures. However, how on earth does the income structure affect the bank performance and is this effect far-reaching and everlasting? These are exactly what this paper is to discuss.The paper divides the income structure of commercial banks into the following six types: net interest income, net fee and commission income, investment income,remittance income, change in fair value gain and other operating income. Base on the financial data of 16 listed commercial banks, the paper is applying the panel data model to study the impact of the income structure on the performance of commercial banks. To begin with, the paper summarizes the relevant research findings both at home and abroad and develops its further study on the basis of understanding the present research status and analyzing the existing literatures. Then, respectively regarding profitability and sustainability of the bank performance as the dependent variable while each type of the income structure as the independent variable, the panel data model is constructed. In the end, the panel data model is processed by adopting the quarter financial data of commercial banks from 2006 to 2014, and main conclusions are drawn as follows:Firstly, each type of the commercial banks’ income structure has a significantly positive impact on its performance. Although the net interest income and net fee and commission income contribute the most to the profit of commercial banks, otherlower-proportional incomes also make contributions to the bank performance and their influences on the bank performance are different. Secondly, in general, the positive impacts of all the incomes on the bank performance is intermittent, especially the net fee and commission income, remittance income and change in fair value gain.With the income excessively increasing, the bankruptcy risk rises instead, which goes against the stable operation and sustainable development of commercial banks.Thirdly, operating cost ratio has a “knee effect”, and the impact of the income structure on the performance is completely converse on the two sides of the inflection point. All in all, when the operating cost ratio is lower than 0.40, the increase of net fee and commission income and investment income can continuously improve the bank performance without worrying about the issue on the over-development of the two incomes.