The Research On Profit Model Transformation Of China’s City Commercial Banks Under The Background Of Interest Rate Marketization

With the rapid development of China’s Interest rate marketization reform, the traditional savings and loan interest spreads of commercial banks will be narrowed which brings a big challenge for the commercial banks’ profit model that relies on the net interest income. The large state-owned banks and joint-stock commercial Banks have innovated business types, accelerated the development of intermediary business to implement new profit model. However, the city commercial banks have increasingly become an important force in the financial institutions. Because of lacking of the financial innovation, spreads leading profit model occupies its dominant position. How to develop steadily under the situation of Interest rate marketization reform and the fierce horizontal competition? Changing the current profit model to enhance profitability will be the main direction of development for the city commercial banks.Under the background of the Interest rate marketization, the decrease of interest spread will constantly compress city commercial banks’ profitability. The improvement of liberalization of interest rates’ floating range increases independent pricing requirements of city commercial banks. The instability of interest rate fluctuations not only brings more interest rate risk and increases the difficulty of coping with the risk, but also brings the credit risk and liquidity risk. What kinds of effective profit models should city commercial banks seek to meet market needs? How to seize the new opportunities in macroeconomic environment? How to respond to various risks actively? These are the main research contents of this article.In this article, we first analyzed the necessity process and the present situation of our country’s interest rate marketization and explicitly pointed out the macroeconomic background that the city commercial banks faced. Based on the practical data, we analyzed the city commercial banks’ current situation, the problems of the profit model and pointed out the new trend of its profit model under the background of interest rate marketization. Then we specifically analyzed the impact of interest rate marketization on city commercial banks’ profit model for both sides. Combining the annual report data, we constructed an empirical model and proved that the marketing interest rate, credit rate, loan-deposit rate have a significant effect on the city commercial banks’ profit model. This suggests that city commercial banks need to constantly adjust the direction of development to improve profitability. Finally, based on the theoretical and empirical analysis conclusion, we proposed specific policy recommendations: first, city commercial banks need to initiatively adapt the interest rate market-oriented macroeconomic environment and the New Normal of commercial banks so that they could find a clear market positioning and define the strategic transformation direction. Second, rational allocate the assets to improve the assets structure. Third, rich the intermediary business and broaden the source of income. Forth, strengthen the real-time intelligent and meticulous management and promote the independent pricing management system. Fifth, construct the interest rate risk management structures and processes and foster outstanding management personnel.