Research On The Profitability Of China’s Listed Medium-small Commercial Banks

In recent years, with the effects of the subprime mortgage crisis and the European debtcrisis continuing, as well as the deepening gradually of interest rate liberalization andfinancial regulation, the macro-economic growth rate in China is slowing down. The bankingsector in particular medium-small commercial banks are subjected to greater risks andprofitability pressures. Faced with this grim financial situation and the reality of the economicdownturn, it is a quite realistic and obviously worth researching problem that whethermedium-small commercial banks as an important component of banking industry couldassess the situation accurately and adjust the operation strategies actively to solve the variousproblems that currently exist, and constantly improve and optimize the corporate governancestructure to achieve sustainable growth in profitability and enhance internationalcompetitiveness and influence.This paper started with the background of Interest rate liberalization, and analyzedprofitability sustainability of Medium-Small listed banks from the bank crisis theory, scaleeconomy theory, financial innovation theory and industrial organization theory. The paperthen introduced the current operating situation of China’s listed Medium-Small commercialbanks from interest rate liberalization. In the empirical analysis part, this paper selected11listed commercial banks during the period of2007to2013as samples and set up panel datamodel with Eviews6.0software. The results indicated that assets, cost income ratio, marketconcentration, capital adequacy ratio, provision coverage ratio had significant effects onmedium-small banks’ profitability. However, net income of fees and commissions ratio,market share and GDP growth rate had failed to pass the test of significance.The paper drew the conclusion: Expanding the ratio of non-interest operating incomewill be the enhancement of medium-small sized listed banks profitability of new growthpoints. Changing profit model and strengthening cost conformity are one of the effectiveways to improve the level of profitability. Then improving asset quality and putting on moreefforts to expand market share also are an effective protection for stable development ofChina’s medium-small sized listed banks. In addition, a good economic environment is alsobasic premise to improve the profitability of China’s medium-small sized listed banks. Finally, according to research findings, it proposed relevant countermeasures and suggestions toenhance the profitability of medium-small sized listed banks. The purpose is to provide somevaluable reference value for the relevant departments and personnel.