The Analysis Of Interaction Of Net Interest Margin And Non-interest Income For Chinese Banks

In the long term,China's commercial banks have kept the traditional model of profit,which pay more attention on interest margin of deposit and loan.However,this model of profit is difficult to sustain with the need of expanding of banking business and the developing of capital market.It has been a common sense that exploring the non-interest practice is vital for China's banking sector,as the non-interest income is making an increasing important role in the revenue structure of commercial bank.Thus,it is of great realistic significance to analysis of the interaction of net interest margin and non-interest income.Through the classification and carding of concerned papers,the paper found that the area of analyses mainly focuses on the unidirectional relationship between the net interest margin and non-interest income,and there are a small number of paper analyze the bidirectional relationship between them.In those few paper,the authors view the non-interest income as a total volume rather than deposing it into several parts,making it impossible to explore the specific path between the net interest margin and non-interest income.Therefore,the article explored specific path between the net interest margin and non-interest income on the basis of decomposition of non-interest income,in order to fill the gap of previous studies.The article first constructs a theoretical structure of the bidirectional relationship between the net interest margin and the special part of non-interest income,which including cross-subsidy path,development momentum path and resource constraint path,profit restrict path as well as stress path.Then,the paper studies the interaction of net interest margin and the composition of non-interest income using the estimation of three stage least squares based on panel data between 2000 and 2015 of 90 Chinese commercial banks.The results indicate that non-interest income has a significantly positive effect on net interest margin,which principally dues to the alternative non-interest income has a significantly positive effect on net interest margin.While net interest margin has a significantly negative effect on non-interest income as net interest margin has significantly negative effect both on the complementary and alternative non-interest income.Moreover,the interaction of net interest margin and the composition of non-interest income are different among state-owned banks and joint-stock banks and local commercial banks.In the end,some particular suggestions have been proposed to facilitate the development of net interest income for different types of banks.