The Research On Chinese Large Commercial Banks’ Profitability And Influencing Factors

Commercial bank is a special enterprise of operatingcurrency, but like the general enterprises, it also needindependent management responsibility for its own profit andloss, through the daily business activities to create value toachieve the ultimate goal. As a commercial bank’s managementprinciple, Profitability, liquidity and safety are thefoundation of its existence and development. As one ofprinciples, profitability makes commercial bank maintainmanagement operation, resist the risk, seek greaterdevelopment, raise their competitiveness. Thus, it has theimportant status in the operation and management of commercialbank.Although affected by the financial crisis and Europeandebt crisis, the international financial environment has been very unstable, the domestic banking industry is booming.Especially in recent years, our country banking industryappeared a continuous profit growth. High profit causes socialhot, meanwhile it also brings the question: whether the profitgrowth is sustainable? Especially in today’s complicated andchangeable international situation, on the arrival of interestrate liberalization, along with today’s increasingly seriousfinancial disintermediation, it is a problem for Chinesebanking industry to be solved that how to grasp the developmentdirection and keep the growth of profitability. Dominating inour country banking industry, large commercial banks’ profitlevel directly affects the profitability of Chinese bankingindustry. And they will also play a role on the development ofthe banking sector. This paper analyzes the profitability oflarge commercial Banks in China and the influence factors, andhope can draw the conclusions and recommendations conducive tothe development of commercial Banks.This article is divided into four parts： The first chapter introduces the background andsignificance of topic at first, reviews the related literatureabout profitability of commercial Banks at home and abroad,then introduces the research objects and research contents ofthis article, and combes the thinking structure, finally thispaper points out the innovation and deficiency of this article.The second chapter analyzes the present situation ofChinese large commercial Banks profitability and itsinfluencing factors. Firstly, with the chart data, through theanalysis of financial indicators including the assets, capitaladequacy, asset quality and profitability, illustrates theearnings performance of the five big commercial Banks in recentyears, shows that Chinese large commercial Banks are improvingin every aspect in recent years, profitability, is alsoincreasing year by year. Secondly, it respectively analyzes itsinfluence on Chinese large commercial Banks profitability fromlarge commercial Banks internal and external macro environmentfactors, comes to the factors that affecting the profitability of large commercial Banks in China mainly includes the assetscale, asset quality, liquidity conditions, operatingconditions, operating efficiency and macroeconomic policies,etc.Third chapter carries on the empirical analysis, basing onthe previous chapter the influence factors analysis, selectingreturn on assets as the investigation of profitability index,selecting total assets, ratio of the loan loss provisions andtotal assets, capital adequacy ratio, ratio of the cash totalassets and total assets, net interest income, ratio of the feesand commissions net income and operating income, ratio of thebusiness and management expenses and operating income, grossdomestic product (GDP) and the rate of inflation as a largecommercial bank’s influential factors of profitabilityindicators, using five big commercial Banks annual report dataduring2005-2011to establish the panel data model and (to)carry on regression analysis, finally concludes that: inaddition to the capital adequacy ratio, ratio of the net interest income and total assets, gross domestic product (GDP),the others are negative correlation relationship.The fourth chapter, according to the empirical results, itproposes the suggestions which improves the large commercialBanks’ profitability. Such as optimization of assets,reasonable controlling of liquidity, strengthening corebusiness management, accelerating business transformation,increasing the financial innovation and so on. TheseSuggestions for Chinese large commercial Banks remainingprofitable sustainability have important guidingsignificance.This paper founds that for maintaining the growth ofprofitability, Chinese large commercial Banks need to focus onthe above factors, and aime at the problem of the largecommercial Banks to improve, reasonablely adjusting assets,achieving economies of scale, optimizing the asset structure,controlling liquidity risk, strengthening the management ofmain business, transforming management concept, speeding up the business transformation, and vigorously developingintermediary business; At the same time, it needs to improvethe macroeconomic environment, improve the regulatory systemof commercial banks. All in all, Chinese commercial Banksshould continue to strengthen their own management, combinewith the actual situation and the future development trend,benign development pattern choice, enhance profitability,competitiveness, strive to become the internationalfirst-class bank.