Study On Influence Factors Of Commercial Banks’ Profitability And Risk

With China accelerating the pace of interest rate marketization and some internet financial companies entering the field of offline entity bank, the competition among Chinese commercial banks will become more intense. China’s economic restructuring and commercial banks’spreads narrowing reversely force commercial banks transforming from traditional extensive expansion of credit scale to enhancing credit quality and efficiency intensivism. Unlike most companies, commercial banks rely on liability operation with a high degree of vulnerability and the return can’t be independent of the risk. Therefore, commercial banks must assess operating risks carefully while enhancing the profitability. In the course of the current restructuring of the income, commercial banks should pay attention to match the profitability and risk to ensure the safety, liquidity and profitability.Firstly, according to the information asymmetry and adverse selection theory in the credit market and fully taking into account the characteristics of commercial banks liability operation, according to characteristics which the commercial bank is different from general corporate in, we analyze the factors affecting commercial banks’profitability and risk within a unified framework, which makes up for the deficiency that information asymmetry and adverse selection theory in the credit market lack empirical tests linking both profitability and risk.Secondly, based on the perspective of credit growth slowing and income structure adjustment, we combine micro-data of Chinese commercial banks with industry data, to carry out theoretical analysis of Chinese commercial banks’credit scale, income structure and market structure at the present stage and establish the regression model in line with the actual situation at the present stage of Chinese commercial banks, which make up for the deficiency that current studies of influence factors of Chinese commercial banks’profitability and risk ignore the background of credit growth slowing and the adjustment of income structure.At last, we select 100 Chinese commercial banks’annual data from 2005 to 2013 to establish a dynamic panel data model, and use the system GMM method to make empirical research, analyzing how the credit growth slowing and income structure adjustment impact the profitability and risk both of the full sample Chinese commercial banks and Chinese City Commercial Banks. The results show that:the effect that credit growth has on whole sample commercial banks’profitability is not significant, that is to say, extensive expansion of the credit scale and the pursuit of the growth rate of loan can’t effectively enhance profitability. City Commercial Banks’credit growth and profitability are negatively related. The current slowdown in credit give City Commercial Banks a good reform period, to enable them to improve their internal mechanisms to effectively improve their profitability. On the other hand, commercial bank credit growth and the risk have a significant positive correlation. The faster the credit grows the greater risk commercial banks will face. This shows that the current situation the credit growth slowing is conducive to the commercial banks to reduce risk. Income restructuring can significantly affect commercial banks’profitability and risk. Increasing the proportion of non-interest income not only can enhance the profitability of commercial banks, but also can effectively disperse risk. So expanding intermediate business and increasing non-interest income are important channels for commercial banks to improve their business status quo. This conclusion provide an empirical basis for commercial banks’ adjustment of income structure during the interest rate marketization reform and the establishment of risk prevention mechanism under the condition of credit growth slowing.