Analysis On Non-interest Income In Chinese Commercial Banks And Its Affecting Factors

Recently, Chinese banks’ traditional business has been challenged a lot by internationalization, rapid interest liberalization and regulations, which calls for transition of traditional business model. Therefore, the research on the development of non-interest income will help commercial banks develop this new business based on their characteristics and strategic planning, and will promote further development and effective administration of the government, which has both theoretical and practical significance.Firstly, we analyze the current condition and existing problems of this new business in Chinese commercial banks comprehensively and explain the theoretical basis of its development motivation, which includes diversification theory, modern portfolio theory, financial innovation theory, financial disintermediation theory and TRICCR Model. Then in the empirical part of this article, we research 14 listed commercial banks during 2006 and 2013 in China. And then we discuss the factors which influence the developmental level of non-interest income using entity fixed effects regression model.Based on theoretical and empirical analysis, and taking the current condition of our financial market into consideration, we find that the scale of non-interest income in Chinese commercial banks has been expanding steadily, however, it is still fower contribution than the case in mature international banks, and the composition of non-interest income is unbalanced. Moreover, state-owned commercial banks are superior to non-state-owned commercial banks in scale and the composition of non-interest income. According to the regression result, we also find that the banks’ characteristics influenced the developmental level of non-interest income. The increase of bank scale and cost control ability will advance the development of non-interest income, while the increase of profitability of traditional business and capital adequacy rate will reduce the development of non-interest income.At last, we put forward the following suggestions:Firstly, in order to further develop the non-interest income, our commercial banks should design new business according to customers’ demand through business innovation, and form a differentiated competitive advantage. They should also strengthen their cost control ability, reducing costs through talent introduction and the perfection of technology. Secondly, our commercial banks should promote the balance of composition of non-interest income, reducing overreliance on some business. So they can reduce income volatility and promote their diversified and sustainable development. Thirdly, as the level of non-interest income is influenced by banks’ scale, profitability of traditional business, capital adequacy rate and cost control ability, this new business should be developed based on the characteristics of each bank. Furthermore, government should strengthen the risk prevention and control and relative regulation of this new business through laws and regulations perfection and risk management mechanism establishment.