A Study On Performance Of China City Commercial Banks

As the core of modern financial institutions, commercial banks are important parts of a multi-level capital market in China, directly reflecting the level of development of our country’s financial institutions. Since the mid-1990s’formation, City commercial banks achieved rapid development based on their own reality by taking full advantage of its flexibility and effectiveness in terms of ownership structure, operation mechanism, institutional settings. With getting rid of the historical burden and completion of shareholding reforms, City commercial banks have grown into important financial institutions to serve the local economic development. According to Banking Regulatory Commission statistics, the total number of City commercial banks is145, their total assets is RMB15.1778trillion as of December2013, an increase of22.9percent compared with the same period last year, accounting for10.3%of banking institutions. From the Urban credit cooperatives to Urban Cooperative Banks and then to City.commercial banks, City commercial banks’strategic positioning and positioning functions have undergone significant changes after nearly20years of development, taking an increasingly important position in the banking industry. At the same time, City commercial banks are facing many urgent problems:fuzzy market position, dependent on the local economy, the blind business innovation and business expansion, serious convergence of financial products, uncultured philosophy and IT service levels, irrational shareholding structure, imperfect corporate governance and other issues. Therefore, this article attempts to build a comprehensive evaluation system of city commercial banks operating performance, and the factors affecting the performance of city commercial banks operating from the micro-level analysis, has great practical significance.This paper is divided into five chapters, the first:chapter introduces the background and significance of this research, ideas and research framework, we innovations. The second chapter is a literature review, a review of major domestic and foreign scholars and combed the research on City commercial banks operating performance. Chapter3proposed the mechanism model of micro factors affecting the performance of the City commercial banks operating performance, then introduces the principle of factor analysis, the advantages and disadvantages of factor analysis procedures. The fourth chapter is about empirical analysis, including the selection of the sample banks and financial indicators, the collection and processing of data, factor analysis and confirmatory factor analysis and structural equation model testing. The fifth chapter is the conclusion and recommendations section, according to the conclusions this paper put forward corresponding suggestions and counter-measures on the development of China’s city commercial banks.The innovation of this article is to construct a multi-index evaluation system of City commercial banks’operating performance and proposed the mechanism model of micro factors affecting the performance of the City commercial banks operating performance. In this paper, we use factor analysis method to study the operating performance of the sample banks, use confirmatory factor analysis to test the goodness of fit of the measurement equation, use structural equation model for empirical testing structural equation.This study’s drawback lies in:(1) Limitations of the study sample. This paper selected74City commercial banks, which accounted for about half of the total sample, this may impact the study conclusion;(2) Limitations of the selection of indicators. The paper selected financial indicators, which reflect the operating conditions of the past, there is a deviation to use financial indicators while ignoring the non-financial indicators;(3) Limitations of the model. This paper attempts to analyze three micro factors’influence on City commercial banks’ operating performance, but there are a lot of micro factors affecting City commercial banks’performance, so to some extent, the model building is unreasonable. The confirmatory factor analysis results show that the scale of operation and corporate governance are highly correlated, but this paper ignores it, the model need to be further optimized.The main conclusions of this study are:1. This article extracted four common factors, namely profitability and operational factors, the profitability factor, mobility factor and safety factor. The three highest-ranked banks on consolidated operating performance scores are Bank of Jining, Bank of Rizhao and Bank of Chengde.2.Structural equation model test results show that:the ownership structure and operating scale of City commercial banks has a negative impact on the banks’ operating performance, which support the proposed hypothesis H1and H2, while the corporate governance factors affecting the operating performance of City commercial banks is not significant, which couldn’t support the hypothesis H3.Based on the above conclusions, the paper proposed targeted recommendations to improve the performance of China’s City commercial banks:(1) Lower interest costs, improve asset profitability and risk control ability, increase loan-to-deposit ratio appropriately to manage liquidity properly;(2) Reduce the concentration of ownership and optimize the equity structure;(3) Improve the technological innovation ability and technical service levels, moderate cross-regional expansion.