A Study On Profitability Of Commercial Banks In China

The profitability of commercial banks is directly related to their own survival and development,and is an important guarantee for the safe operation of Chinese banking and the financial system.With the lower economic growth,deepening reform of financial market and increasing types of social financing,Chinese banking traditional businesses have been shocked a lot.Net profit has declined year by year,some banks even experienced zero and negative growth,which has forced commercial banks to make strategic adjustments as soon as possible in order to seek long-term development under the new economic condition.By the collation and classification of a large number of domestic and foreign references,this paper analyzes the current situation and existing problems of Chinese commercial banks based on the external environment and related profit indicators of commercial banks according to the data of China banking regulatory commission statistics.Then,through the qualitative and quantitative methods,the data of 8 banks from 2005 to 2015 were selected as the samples,and the random effect model of the profitability of commercial banks was established by using EVIEWS7.0 to analyze the influence degree of each index on profitability:The income structure has a significant effect on the profitability of Chinese commercial banks,in which the net interest margin is stronger than the non-interest income;the improvement of the operation efficiency can greatly improve the bank’s profitability;the asset size will greatly curb its profitability;non-performing loans will significantly reduce the profitability of commercial banks in China;The higher the capital adequacy ratio,the higher the profitability of the bank;although the macro environmental factors have positive correlation with the profitability of banks,but not significantly,which may be due to lag.Based on the regression results and the national policy trend,this paper puts forward a practical way to improve the profitability of Chinese commercial banks,which is called venture loan.Starting from the case on venture loan of Silicon Valley,this paper analyzes the motivations of P/E and P/B ratio which are higher than other banks around its operation mode,risk control mechanism and source of profit.Then two practicing modes of venture loan of Chinese commercial banks are introduced,and the paper explains the strategic significance of venture loan to the development of the commercial banks.Finally,the practical and effective countermeasures that reasonably control asset size of banks,encourage the development of venture loan so as to improve the income structure,strengthen the cost control and enhance operation efficiency,reduce non-performing assets and increase capital adequacy,actively respond to macro economic changes and strive to create a good external environment are proposed,in order to more effectively raise the profitability of Chinese commercial banks,as well as ensure the efficient and steady development of Chinese banking.