Determinants And Risk Analysis Of Net Interest Margins Of Listed Banks In China

Net interest margin is an important indicator which measures the commercial bank’s profitability and an effective indicator for the evaluation of commercial bank’s pricing power. The study of commercial bank’s net interest margin can analyze and predict the profitability of commercial banks, and risk analysis of the net interest margin can evaluate the robustness of the financial system. At present, the interest rate marketization reform causes the increasingly fierce competition in the financial industry, also makes the commercial bank’s net interest margin volatility bigger, therefore, the study of net interest margin is meaningful in theory and practice.Based on the descriptive statistics of16listed commercial bank’s net interest margin, according to the original dealer model of Ho T S Y, Saunders (1981) and later extensions, I build an empirical model to identify the determinants of net interest margins of commercial banks in China. And then I use the16listed Banks’ panel data (from the first quarter of2011to the third quarter of2014) to do the empirical analysis of net interest margin. Net interest margin will map to each risk factor, at the same time I can get the influence of various risk factors on the net interest margin. The results show that the achievement of interest rate marketization in our country is pretty good, but there is still a lot which can be improved.Then, based on the established net interest margin’s determinants model, risk analysis(Value at risk analysis and stress testing, etc.) of the net interest margin was carried out. By setting different pressure scenarios and assuming different risks which commercial banks may face, I do the analysis of the robustness of the financial system. The results show that the banking system’s robustness is not bad, but banks still should have enough vigilance.