Study On The Impact Of Non-Interest Income On Profitability Of Bank B

The core business of commercial banks in China is credit business,but during the 14 th Five-Year Plan period,the changes in the domestic financial ecological environment have accelerated,which has inevitably driven the transformation of the profitability model of commercial banks in China.As a result of the gradual improvement of the Loan Prime Rate(LPR)mechanism reform,the comprehensive empowerment of financial technology in the management of Chinese commercial banks,the broadening of capital storage channels by Internet finance,the intensification of the phenomenon of "disintermediation" of financial intermediaries and the fierce competition from foreign banks,the advantages of Chinese commercial banks in obtaining profits through the deposit and loan spreads are gradually disappearing.The advantage of commercial banks to obtain profit through deposit and loan spread is gradually disappearing.The non-interest income business of commercial banks has become a new profit growth point for banks due to its low cost,low capital consumption,high stability and weak economic cyclicality.Therefore,this paper takes Bank B,which has the most core tier 1 capital,the strongest risk offsetting capacity and comprehensive strength among urban commercial banks and is included as a systemically important bank in China,as an example to explore the impact of non-interest income on profitability.This paper introduces the domestic and international literature in terms of both income diversification and non-interest income firstly.Second,the theoretical basis for studying the impact of noninterest income on profitability is presented.Moreover,Bank B is used as an example.The impact of Bank B’s non-interest income on profitability is studied.On the one hand,this paper starts from analyzing the overall development of interest income and non-interest income in chinese banking industry,and then analyzes in detail the income structure of Bank B and the change trend of the internal structure of non-interest income.It also further analyzes the development status of the internal components of non-interest income business in the light of the actual business situation.On the other hand,Bank B’s profitability is analyzed comprehensively from four aspects: asset position,profitability,sustainability and growth.Subsequently,in the empirical analysis of the impact of Bank B’s noninterest income on profitability,its impact on profitability is considered from four perspectives: the share of noninterest income,the degree of income diversification,the share of internal components of noninterest income in operating income,and the cross product term of the share of noninterest income and asset quality(measured by capital adequacy ratio).The results show that:(1)Bank B’s noninterest income can effectively improve its profitability.(2)Income diversification can expand the scope of Bank B’s business,generate economies of scope,bring diversified income to Bank B,and optimize the profitability structure of Bank B as a whole.(3)Among the components of Bank B’s non-interest income,net fee and commission income from fee and commission business and investment income from investment business have a significant positive impact on profitability,while exchange business has a negative impact on profitability,and other non-interest income business,although small in scale,also has a positive impact on profitability.(4)Indicates that the higher the asset quality,the higher the capital adequacy ratio,the more own capital the bank holds and the business strategy gradually transforms from mainly credit business with high capital tied up to non-interest income business with low capital tied up.Therefore,the deeper the positive impact of the non-interest income ratio on the profitability level of Bank B.Finally,on the basis of the above findings,suggestions for further development of Bank B’s noninterest income business are proposed in three aspects:based on the location advantage,carrying out differentiated services,promoting high-quality development of noninterest income business and strengthening risk management of noninterest income business.