Research On The Path Of The Profit Structure Adjustment Of Chinese Commercial Banks

Commercial bank being the foundation of Chinese Economy, its good operation is the key to the development of other industries. Ever since the 2008 global financial crisis swept the globe, it triggers a tide of mergers and acquisitions among foreign commercial banks. Although commercial banks in China have suffered limited impact, still the global financial regulatory reform which is triggered by this phenomenon has profound influence on China’s financial industry especially commercial banking industry. At the end of 2014, the deposit insurance regulations(draft) officially released, according to the provisions of the fifth draft, the deposit insurance to implement a cap and pay, with the maximum payment limit of 500 thousand yuan. The introduction of the deposit insurance system of our country has once again made the commercial banks become the focus of people’s attention.The external management environment of the Commercial Bank of China is undergoing profound changes, and factors such as economic integration, financial disintermediation, the regulatory capital increasingly strengthening and a series of development trend is constantly bringing new challenges to the continued profitability of the Chinese commercial banks. Firstly, the interest rate liberalization narrows the interest margin, which is the base of traditional Chinese commercial banks profit. Secondly, the rapid development of direct financing constantly challenges the traditional financing intermediary status of China’s commercial banks. Predictably, with financial disintermediation sustainably developing, commercial banks’ traditional financial intermediary status will be increasingly shaken. Thus seeking new and more diversified functions and reshaping the business model and profit structure have become the inevitable direction of Chinese commercial banks’ restructuring and development focal point.This paper firstly takes three developed country, the United States, France and Germany as example, and analyzes the changes in the patterns of the profit structure of commercial banks in developed countries based on a review of international banking regulation evolution. And the analysis leads to the following results: non-interest profits have always played an important role and non-interest profits ratio is vulnerable to external factors and macroeconomic environment. And then classified Chinese commercial banks by their asset sizes into 3 categories, maga-sized commercial banks which have the asset scale ranged between 50,000 billion yuan to 200,000 billion yuan, medium-sized commercial banks which have the asset scale ranged between 10,000 billion yuan and 50,000 billion yuan and small-sized commercial banks which have the asset size below 10,000 billion yuan. And 15 commercial banks are chosen as the sample for the analysis, 5 for each category. The sample banks are five mega commercial banks, Industrial and Commercial Bank of China, China Construction Bank, Bank of China, Agricultural Bank of China, Bank of Communications; 5 medium-sized banks, China Merchants Bank, Industrial Bank, CITIC Bank, China Minsheng Bank, Shanghai Pudong Development Bank; 5 small-sized commercial banks, Bank of Dalian, Bank of Wenzhou, Bank of Zhengzhou, Bank of Xiamen, and Bank of Qingdao. After classifying Chinese commercial banks this paper analyzes the changes in the patterns of the profit structures, and how commercial banks’ profit diversification influences their performance for different categories of commercial banks using data between year 2005 and year 2014. And the analysis finds that different scale commercial banks have different profit structure evolution progress, and diversified profit structure is conductive to raise their performance in mega-sized and medium-sized commercial banks.Overall, according to the conclusion of this study, I believe that the direction of the transformation of different types of commercial banks should be different and characterized in China. Larger asset scale banks should focus on integrated management and smaller scale banks should care more about the stability of profit in the direction of specialization.