A Research Of The Operating Efficiency Of Agricultural Bank Of China:Base On SBM-Undesirable Method

Numerous of empirical research on efficiency of commercial banks have been conducted whether domestically or internationally,but there have been a lack in research considering bad loan in efficiency study.Under the current sluggish economy,the bad loan ratios of commercial banks are increasing.Thus,if bad loan is ignored when studying efficiency,the results could be projected higher than actual.Agricultural bank of China,as one of the listed nation owned commercial bank,has facing a decreasing profitability for the last few years.This article focus on Agricultural bank of China,launches technical efficiency analysis,and try to dig out the elements influencing technical efficiency,in order to find ways to improve the efficiency of this bank.The paper uses the SBM-Undesirable model in DEA methodology,studies the operating efficiency of the agricultural bank,using loanable amount,operation and managing costs as input,non-interest income,normal amount of loan as expected output.In the meantime,bad loan amount is treated as unexpected output,which is ignored by scholars in most research,in order to measure the differences in technical efficiency of Agricultural bank of China and that in the other 15 listed commercial banks.Comparing the result of Pure Technical Efficiency and Scale Efficiency as well as analysis of weight and projection analysis,findings are the ranking of Technical Efficiency of the Agricultural bank is relatively low in the sample,and Scale Efficiency is however better.the ranking of Pure Technical Efficiency and changing trend are consist with Technical Efficiency.This shows that the main elements dragging the Input & Output Efficiency of the agricultural bank are operation and management.The analysis reveals that the problems in the bank’s operation and management are the weakness in controlling and managing bad loans,the improvable space in product innovation of middle service,weakness in cost control.When analyzing the operating and management fee,the author found that the problem of cost control is the agricultural bank,compared to other banks,puts more labor and material costs to generate operating income.Based on these problems,the author suggests that the bank should focus on prediction of the macro-economy,keeping track of the bad loans and calling in loans.It should use various managing methods actively to lower bad loan rate,and avoid the coexistence of high provision coverage and high bad loan rates.Also,to innovate based on customer needs and improve middle service product according to user experience.Managing its cost by transferring from traditional branches to E-marketing Centre might also help.