The Impact Of Asset-backed Securitization On Return On Equity Of Chinese Commercial Banks

With the strengthen of financial regulation since 2017,commercial banks start to seek profit from standardized off-balance sheet businesses such as asset-backed securitization.Existing studies on asset-backed securitization mostly focus on the general utility of commercial banks.However,in-depth study on the utility of return on equity(ROE)is not sufficient.In order to fill this gap,the current study uses DuPont analysis to analyze 19 commercial banks listed on the A-share market in China,from 2012 to 2017 by quarter.Methodology in this study includes situation analysis and regression analysis.Situation analysis shows that the new ‘strong supervision' era brings new opportunities to asset-backed securitization in China;state-owned commercial banks have larger value of asset-backed securities than other commercial banks,while local commercial banks tend to have a high potential in the future;the two largest underlying assets of asset-backed securities are housing loan and company loan.Regression analysis shows that the current influence of asset-backed securities to ROE is not significant;from the specific routes,leverage is significantly increased,while profitability and asset turnover show no significance;local commercial banks have high potential in developing asset-backed securitization;profitability of commercial banks will be decreased by housing loans backed securities significantly.Based on results,this essay raises suggestions that the country should firstly create a healthy environment for asset-backed securitization to develop.Then,commercial banks should pay more attention to the profitability and asset turnover sides of assetbacked securities.In addition,commercial banks should carefully choose the underlying assets behind asset-backed securities in the future.