A Study On Chinese Banking Industry's High Profit Which Based On Industry Comparison

Commercial banks' profitability has been the focus of academic research.In recent years, with our bank industry's profits continue to climb, the controversy which surrounding whether the profit is excessive or not becoming increasingly fierce. How to define the level of our bank industry's profit and analyze the underlying reason of its continued growing have become very necessary. This paper analyzes from the perspective of industry's contrast, we select 16 listed banks and 9 major industries 2006-2012 panel data as the research object. Through comparative analysis of the factors which affect their profit, we can investigate the true reason of our bank industry's high profit. On this basis, we propose policy recommendations for the development of our bank industry.We summarize the relevant theories of research on banks' profitability,through some representative indicators of profitability, we firstly compare the gap between the bank industry and the entity industry, then analyze and compare the factors which affect their profitability, finally determine the both internal and external indicators. On this basis, the econometric model's empirical results show: market structure positively and significantly correlates with bank profitability, but the relationship with the entity industry is not significant; the spread also positively and significantly correlates with bank profitability, but the relationship with the entity industry is negative and not significant; the securitization rate also exist significant difference. These show: although after years of reform and development, good macroeconomic environment and bank industry's reform by itself have enhanced the level of our bank industry's profits, yet the most important reason which caused the vast profit gap between the bank industry and the entity industry is the administrative controls, including barriers to enter the market and interest rates unmarketization. In addition, it's also due to China's long-term indirect financing mode which is predominant, these suggesting that our bank industry's profits continue to climb is at the expense of the entity industry's profit in some extent. It also shows the higher the financial barriers to entry,the serious the control of deposit and loan spread, the slower the developmentof capital market, and the longer the excess profit which bank industry achieved. Therefore, broaden the financial barriers to entry and guide the private capital to participate in the establishment of private banks, push on the interest rate marketization and increase the proportion of direct financing,which are the inevitable initiatives to achieve the goal of finance support the entity industry.