The Empirical Research On The Impact Of Non-Interest Income On The Performance Of China's Urban Commercial Banks

With the advancement of financial dislocation and marketization of interest rate,the competition of banking industry is intensified,and the traditional profit model of China's commercial banks depending on deposit and loan spreads has been challenged.Business transformation has become the new normality of banking development.Non-interest income,especially the non-interest income which is less associated with the credit business,is increasingly favored by commercial banks due to its light capital and anti-cyclicity.To enhance the portion of non-interest income in commercial bank operating income has already been the key in the transformation of commercial banks.However,there has not been a final conclusion in the academic field about the impact of this change in the income structure of commercial banks.The research of this topic has also been the long-term concern for the banking industry and academia.In this paper,the generalized moment estimation method(GMM)is introduced into the dynamic panel data model by using the microscopic financial data of 54 China Urban Commercial Banks from 2008 to 2014,and the influence of non-interest income on the performance of China's urban commercial banks is investigated,which includes four aspects.First,the impact of China's urban commercial banks non-interest income on the performance of banks;second,the breakdown sub-items of China's urban commercial banks non-interest income----that is the impact of fees and commission income,investment income on the performance of bank;thirdly,the impact of the diversification of income structure of China's urban commercial banks on the performance of bank constructed by the entropy index method.Fourthly,the estimation the optimal size of non-interest income and non-interest income sub-items and urban commercial banks sub-items based on the linear or non-linear relationship between the performance of China's commercial banks,non-interest income and non-interest income.At the same time,considering that the bank asset size and parameter estimation method may have an impact on the empirical results,the paper testifies the above empirical results with robustness test:take the asset size equal to 20 billion US dollars as a critical point,the overall sample is divided into two parts----assets smaller than 20 billion US dollars and assets of more than 20 billion US dollars to examine if the size of commercial banks will have an impact on the above-mentioned empirical results.In the empirical test,generalized moment estimation method(GMM)on the dynamic panel data is used to estimate the parameters,In order to provide more reference for the rationality of the estimated coefficients of the dynamic panel data model,the estimation coefficients of the static panel data model are given at the same time.The main conclusions are as follows:First,the non-interest income(Nil)of China's urban commercial banks,the urban commercial bank fee and commission income ratio(FCI)of the non-interest income sub-item,and the investment income ratio(IVI)all have a positive effect on bank performance.This empirical result validates that:non-interest income has a positive effect on urban commercial banks in China.Second,the impact of the diversification of income structure(DIVE)on the performance of banks in China's urban commercial banks constructed by the entropy index method is significantly positive.The empirical results are in line with those of the modern portfolio theory----that is assets are more risky than diversified assets,and are more conducive to raising the portfolio yield.Combined with the empirical results,and learning from the modern portfolio theory,China's urban commercial banks broadening the income sources can provide a stable diversified income for banks.Third,both the non-interest income ratio(Nil)and the fees and commission income ratio(FCI)of China's urban commercial banks have an "Inverted U-type" relationship with the performance of the banks,and the calculated first-order derivative of the models are 19.12%and 17.24%respectively,which means the developing scales for both the non-interest income(Nil)business and the fees and commission income(FCI)business have an optimal state,and larger scales aren't necessarily better.However,there exists no "inverted U-type" relationship between China's urban commercial banks investment income ratio(IVI)and bank performance.Which means the best point for maximizing the contribution of IVI to bank performance can't be found from the perspective of mathematical model.At the same time,compared with the actual situation of non-interest income scale of China's urban commercial banks,the non-interest income of China's urban commercial banks as a whole and the fee and commission income did not reach the optimal scale of the model,and there is still room for improvement.Therefore,China's urban commercial banks should combine their own operating characteristics and local economic development characteristics,identify positioning,differentiate the expansion of intermediary business,constantly improve the non-interest income in the proportion of operating income,and optimize the income structure of urban commercial banks.