Analysis On The Factors Of Non-interest Income Of Chinese Listed Commercial Banks

Non-interest income which originated in the West is used to distinguish from the interest income which generated in the traditional balance of business. The pattern of the Western financial system has experienced a revolution since the1980s. Due to the full development of the capital market, the dominant position of traditional commercial banks in the financial markets is facing threat. There are more financing channels in capital markets for funding needs. The emergence of direct financing makes the borrowers no longer through the commercial banks which originally as an intermediary. The phenomenon of "financial disintermediation" is increasingly serious. At the same time, investors have more choice. They can invest in stocks or bonds, so they claim to the increasing income. Commercial banks hard to get low-cost deposits and liabilities of the business is impacted. It is in this context, the western commercial banks began to actively expand new profit sources, non-interest income.Relaxation of banking regulation, financial and technological innovation provided good conditions for the development of non-interest income in Western banks. Bank holding companies were the main form of organization in western banking. They carried out diversification through it, so non-interest income increased rapidly. The proportion of non-interest income accounted for revenue is45%in the United States and Canada commercial banks and the proportion is44%in European countries. In the west, non-interest income has become an important source of profits in commercial banks.But in China, non-interest income business started late. Associated with the development of the economy, the financial needs of the residents and corporations increasingly diversified. Under the competitive pressure from the non-bank financial institutions and foreign banks, commercial banks began to change the revenue structure, to carry out a wide range of operating. With the deepening of interest rate marketization, the competition of traditional business is fierce in the bank industry. Deposit and loan spreads are narrowing, and the traditional business’profitability is declining. Improved capital regulation requirements also prompted commercial banks to obtain non-interest income which occupied less capital.Recently, non-interest income development became a new trend in China’s bank industry. Regardless of the total amount of non-interest income and the proportion of non-interest income showed an upward trend. But the proportion of non-interest income levels in China is still low compared to developed countries. Chinese commercial banks’ non-interest income accounted for19.59%in2011, and the level is low. The state-owned banks’ non-interest income accounted for23.46%, and non-state-owned banks’ non-interest income accounted for15.72%. It shows that there is a huge difference in the developing of non-interest income of different nature banks. The internal structure of non-interest income is simple, mainly of fee and commission income. The development of fee and commission income in state-owned banks is stable, but rapid growth in non-state-owned banks, and other non-interest income accounted for a relatively small. Therefore, it is very necessary to study how to further expand the non-interest income of commercial banks in China, and study the influencing factors of non-interest income as well as the differences of influencing factors in different nature of banks. According to the different role of influencing factors which commercial banks expand the non-interest income in different nature of banks, providing decision basis for state-owned banks and non-state-owned banks, this is the significance of this paper.There are the conclusions and revelation of this study below.First, non-interest income accounted negative correlation of the size in state-owned banks, and accounted positive correlation of the size in non-state-owned banks, but is not significantly. State-owned banks have large scale of traditional balance business, so they do not have enough enthusiasm to expand non-interest income business. Non-state-owned banks have smaller assets compared to state-owned banks, so the positive impact is not significant.Second, the reaction is more sensitive to the decline of traditional business profitability in state-owned banks. The balance of the business is larger in state-owned banks, when the rate of net interest income decreased by one unit, the loss of net interest income in the state-owned banks will be huge. So the state-owned banks are more motivated to expand a new source of profits, developing non-interest income business.Third, the better capital position the bank have, the more likely to carry out a variety of non-interest income business. The proportion of fee and commission income in non-interest income constitutes about85%on average, while other non-interest income, including investment income, changes in the fair value of the net gains and losses, foreign exchange gains and other business income share very small proportion. As a whole, capital requirements are not high for developing non-interest income. This is why the correlation is not significant.Fourth, the better relationship between banks and their customers the bank has, the higher level of its non-interest income. This effect is not significant in the state-owned banks, but it plays a role in the non-state-owned banks. It shows that the state-owned banks do not pay attention to the cultivation of customer relationships, and do not take full advantage of its wide range of customers based on the traditional business. Due to the limited size of its traditional business, non-state-owned banks are better at maintaining customer relationship.Finally, according to the empirical results, give five proposals as follow. First, promote the restructuring of income actively, and the state-owned banks should reduce dependence on traditional balance business. Second, take full advantages of scale. Especially state-owned banks should make use of its more network, wider distribution channels and more traditional customer resources, expanding the non-interest income business actively. Third, adjust the internal structure of non-interest income reasonably, and actively develop a wide range of non-interest income. Fourth, strengthen the maintenance of customer relationship. Fifth, focus on customer segmentation, non-state-owned banks should selectively provide non-interest business.