The Research On Non-interest Income And Performance Of Commercial Banks In China

With the development of financial liberalization and application of new financial technology, banking industry in western countries has been steadily increasing its reliance on nontraditional business activities that generate fee income, trading revenue and other types of non-interest income since 1970s.The proportion of non-interest income has been remained relatively low in China. Whereas, people have realized the importance to adjust the income structure of commercial banks in recent years under the pressure of the tightening interest margin. Many innovative bank products and services are provided to create more non-interest income although how it will affect banks' performance is still a question.In this article, we start with the concept and character of non-interest income and analysis the reasons to develop non-interest income from a theoretical angle. We also introduce the status quo of the non-interest income of Chinese commercial banks as well as the restrictions and risks. In the empirical analysis part, we select the financial data of 12 commercial banks during the period of 1998 to 2007 as the research sample. The result indicates that there is a positive correlation between non-interest income ratio and banks' performance under the condition of limited operating expenses. Finally, some suggestions are given to China's commercial banks on how to improve non-interest income and enhance banks' performance.