Research On Profitability Sustainability Of China's Listed Commercial Banks

In recent years, a series of reforms and developments of China's commercial banks have caused fierce debate and strong concern in the society. As the state-owned commercial banks, the national shareholding commercial banks as well as the city commercial banks gradually listed on the stock market, their profitbality has been improved greatly. However, whether the current high level of profit will sustain, what factors affect the profitability, and how the factors will influence it, these questions are quite realistic and obviously worth researching.This paper started with the definition of profitability sustainability, and analyzed bank crisis theory, scale economy theory, financial innovation theory and corporate governance mechanism. The paper then introduced the current operating situation of China's listed commercial banks. In the empirical analysis part, this paper used panel data model and selected 14 listed commercial banks during the period of 2003 to 2009 as sample. The results indicated that cost income ratio, net income of fees and commissions ratio, capital adequacy ratio, provision coverage ratio and GDP growth rate had significant effects on banks' profitability. The paper analyzed the profitability sustainability from the following four parts:income structure, operation efficiency, risk prevention and control ability and macro economic factors. The paper drawed the conclusion:Firstly, compared with the interest income, fees and commissions net income will become the suporting point of the future profitability sustainability; Secondly, achieving high operation efficiency is another way to improve profitability sustainability; Thirdly, after fulfiling the requirements of capital adequacy ratio and provision coverage ratio, reducing bad loans ratio is the basic guarantee of pursuing profitability sustainability; In addition, macro economic support is the fundamental guarantee to profitability sustainability. Finally, some suggestions are given to how to improve the profitability sustainability of China's listed commercial banks.