The Impact Of Non Credit Business On Profitability Of Chinese Commercial Banks

In recent years,the advancement of interest rate liberalization,the intensification of financial disintermediation and diversified development trends have made commercial banks,which rely on traditional credit operations,face enormous challenges.At the same time,the relaxation of financial market access mechanisms has also enabled banks and Competition between banks is increasing.Faced with the internal and external pressures,how China’s commercial banks respond to the challenges of the times,improve their own profitability,and form the core competitiveness of the industry are issues that commercial banks are currently desperate to solve.Only by continuously developing and innovating financial products and services,commercial banks can meet a series of challenges and seek new ways to increase profits,thus making commercial banks invincible in the increasingly fierce competition.The development of non-credit businesses by commercial banks is an attempt to innovate financial products and services.Whether they can improve their own profit levels is a question worth discussing.With regard to the research on non-credit business and profitability of commercial banks,Western developed countries started earlier.There are two opposing views on whether non-credit businesses can improve the profitability of commercial banks.Some scholars believe that commercial banks can improve their own development of non-credit businesses.Profitability,another scholar believes that it cannot improve profitability.However,it is relatively late for China’s commercial banks to carry out non-credit business.Most scholars mainly study the development of non-credit businesses in China’s commercial banks and capital supervision issues through theoretical analysis,and use the methods of classification and comparison to differentiate China’s non-credit assets and risks.From the angle of view,and laid a theoretical foundation for the development of non-credit businesses in China’s commercial banks.Based on the existing research,this paper analyzes and judges the impact of non-credit business on the profitability of commercial banks from the perspective of the theory of economics,and establishes a dynamic panel data system(GMM)model to verify the profitability of non-credit businesses and commercial banks.The relationship,through the combination of theoretical analysis and empirical analysis,comprehensively analyzes and verifies the relationship between non-credit business and the profitability of commercial banks.This paper takes the meaning and scope of non-credit business as the starting point,introduces the characteristics of non-credit business,and links with the intermediate business and off-balance sheet business,and explains its theoretical basis in terms of scope economy,financial innovation and diversification.The impact of commercial banks’ profitability.Afterwards,it describes the development history and current status of non-credit business in China’s commercial banks,and graphically analyzes and Pearson correlation test to initially illustrate the view that China’s commercial banks can develop non-credit business to improve their profitability.In the empirical part,the GMM model of the dynamic panel data system was established using the relevant data released by the 16 listed commercial banks in the 2008-2016 financial statements.The ratio of non-credit business income to operating income is used as an indicator to measure non-credit business of commercial banks.Total assets return rate is used as a proxy variable for the profitability of commercial banks.At the same time,the lagging period of total assets return rate is used as a tool variable.In the model,and adding the square of the non-credit business,examine the long-term relationship between the non-credit business and the profitability of the commercial bank,and add control variables such as net interest income,non-performing loan ratio,bank size,etc.,in order to look from different perspectives.A comprehensive analysis of its impact on the profitability of commercial banks.The empirical results show that the non-credit business is significantly positively correlated with profitability,while the non-credit business square is significantly negatively correlated with profitability,indicating that the non-credit business and commercial banks have an inverse U-shaped relationship;the bad loan ratio coefficient is significantly negative.It shows that the more non-performing loans,the greater the credit risk faced by commercial banks and the weaker the level of profitability.Finally,the paper integrates the theoretical basis and empirical research on the profitability of non-credit businesses and commercial banks,and draws a series of relevant conclusions.Based on the conclusions,the paper puts forward the appropriateness of non-credit business scale,non-performing loan ratio,and financial supervision.The development of China’s commercial banks put forward relevant policy recommendations.