The Non-interest Income’s Diversification Effect Study

This paper studies the diversification effect of commercial bank non-interestincome and mainly analyses the influence of non-interest income on commercial bank’soperating risk and profitability. Firstly, this paper introduce the related theory of thescope of the economy, the new business strategy theory and the theory of intermediarybusiness of commercial bank; Secondly, the article has carried on the theoreticalanalysis about commercial bank non-interest income, defining the theory connotation ofnon-interest income diversification effects; Thirdly, The characteristics of non-interestincome, influence factors of non-interest income and the development status ofnon-interest income are analyzed; And then, on the basis of related theory tonon-interest income,the econometric model of diversification effect is constructed;Using panel data of16listed commercial banks in China a-share market from2003to2012, this paper measure the diversification effect of non-interest income ratio andgrowth rate to listed commercial banks’ business performance and profitability in China,adopting three analytic technique the portfolio theory model analysis, correlationanalysis and panel data regression analysis. Finally, the empirical results are analyzed,and then put forward relevant policy Suggestions.Through empirical analysis，we reach the following conclusions:①Non-Interestincome has grown in size and the proportion of non-interest income to net operatingincome increased, but the proportion of non-interest income is relatively small than netinterest income,so that the non-interest income still has great potential for development.②Fees and commissions net income is the main source of non-interest income, andthe kinds of products and business innovation is insufficient in listed commercial banks.③the proportion of non-interest income and its steady growth is beneficial to optimizethe commercial bank’s income structure, reducing the management risk of thecommercial banks.④Improving non-interest income ratio was beneficial to theimprovement of the commercial bank’s profitability, reducing volatility of profitability.⑤the diversification effect of non-interest income is distinct between largestate-owned commercial banks and joint-stock commercial banks.According to the above research conclusion, we put forward the followingsuggestions:①Optimizing the income structure of commercial banks, developing thenon-interest income business and improving non-interest income ratio, so that the non-interest income develop as the strategic direction of commercial banks.②Strengthening the management of non-interest business, innovating the products andservices of non-interest business and carrying out a variety of marketing methods.③Large state-owned commercial banks and joint-stock commercial banks should adoptthe strategy of differentiation.④on the premise of preventing systemic risk of bankingand finance, regulators should be reduce regulation to non interest business ofcommercial bank in China, actively encouraging commercial banks to carry out thenon-interest business.