Research On The Way Of Improving The Profitability Of Rural Commercial Banks Through Financial Innovation

The innovation of bank finance is to realize the innovation and reform of banking system and financial instruments through the recombination of different factors within the bank.In recent years,with the decline of macroeconomic growth rate,the promotion of interest rate marketization reform,financial degasification and the continuous development of information technology,commercial banks mainly spread the traditional deposit and loan business model can not meet their own profit needs.The banking industry urgently needs to transform through financial innovation and discover new sources of profit.However,although financial innovation will bring about an increase in expected returns for commercial banks,it will also lead to additional risk exposure for commercial banks.In the context of increasingly strict supervision,China's rural commercial banks not only to reidentify the bad assets,but also to allow more off-balance sheet assets back to the table,which will make rural commercial banks increase the risk meter mentioned the consumption of more capital.At the same time,the business model of rural commercial banks has been subject to stricter regulatory constraints,and the return on assets has declined significantly in recent years,while the rate of bad loans has climbed.How to solve the problems faced by rural commercial banks through financial innovation under many constraints,and find the way to improve the profitability of rural commercial banks,so that rural commercial banks better serve the local economy is particularly important.Through the research,it is found that the business model,profit growth and capital adequacy of rural commercial banks constitute a triangular closed loop with interactive influence.Among them,profit growth needs to be driven by business,while the credit-based business model is limited by capital adequacy,in addition,capital adequacy is overly dependent on the retention of profits.It can be seen that the basic path of financial innovation of rural commercial banks should take profit growth as the goal,focus financial innovation on the factors that affect the profit growth of banks,and actively expand capital replenishment channels to provide strong support for innovation activities on the premise of capital adequacy,and make business development as the main focus point,Innovate activities in line with policy orientation and regulatory logic.Based on this,this paper selects the representative Guangdong Nanhai Rural Commercial Bank as the case object.By analyzing the path and effect of the Nanhai Rural Commercial Bank using financial innovation to improve its profitability,it is found that in the early stage of financial innovation,the capital of the Nanhai Rural Commercial Bank will be consumed by the development of innovative business and the investment of resources,but the Nanhai Rural Commercial Bank has actively expanded its own capital replenishment channels,For the subsequent innovation activities to provide a stable support;in the process of financial innovation,the Nanhai Rural Commercial Bank has focused its scientific and technological investment on the internal promotion of risk control capacity and external upgrading services and image,which also makes the Nanhai Rural Commercial Bank's asset quality far beyond the industry,reputation and market share has always been ahead of other commercial banks Moreover,the Nanhai Rural Commercial Bank is able to develop its products in a targeted manner every year to serve small and medium-sized enterprises in the South China Sea region.With good relations and continuous and effective communication with local companies,the Nanhai Rural Commercial Bank can achieve higher economic effects when companies develop rapidly during the economic boom,while in the economic downturn,the Nanhai Rural Commercial Bank can reduce or avoid losses with lower transaction costs.Based on the above aspects,Nanhai Rural Commercial Bank has now become a sustainable profit,in line with the regulatory logic of the national benchmark rural commercial banks.Therefore,Nanhai Rural Commercial Bank to carry out financial innovation to improve their profitability of the path worthy of the vast number of rural commercial banks to learn from.