Research On The Impact Of Non-Performing Asset Securitization On The Profitability Of Commercial Banks

Commercial banks play an important role in China’s financial system,which mainly relies on indirect financing.They are the center of national economic operation and the most important credit intermediary in the financial system.In recent years,the global financial environment has cooled,and China’s economic growth has gradually slowed down.The arrival of the COVID-19 has increased the downward pressure on the economy.The non-performing assets of various commercial banks continue to accumulate,and the non-performing loan ratio and non-performing loan balance show a "double increase" trend.In February 2016,the People’s Bank of China announced the resumption of the pilot program for non-performing asset securitization,aiming to open up new ways for commercial banks to handle non-performing assets.Compared with the traditional method of bulk transfer,securitization can improve the efficiency of non-performing asset disposal,diversify risks,alleviate pressure,and improve profitability for commercial banks.It is of great significance for the development of banks themselves and China’s financial system.Based on the basic principle of non-performing asset securitization,this paper expounds the impact path of issuing non-performing asset-backed security on the profitability of commercial banks from the perspective of income and cost.Then further,through the Du Pont identity,the ROE representing the profit level is divided into three more specific profit related indicators,namely,profit rate of sales,Asset turnover and equity multiplier,to analyze the impact of non-performing asset securitization on more detailed financial indicators and build a theoretical framework.Next,the author selects 11 commercial banks participating in the securitization of non-performing assets as the research object.Based on the panel data from the first quarter of 2017 to the third quarter of 2022,with the issuance activity of non-performing asset securitization as the core explanatory variable,the author uses the two-way fixed effect model to analyze the impact of non-performing asset activity on the ROE of commercial banks.Next,further regression is conducted on the segmented financial indicators obtained from the decomposition of ROE to explore the impact of non-performing asset securitization on the daily operations of commercial banks.Simultaneously conducting heterogeneity testing to analyze the differences in the impact of non-performing asset securitization business on the profitability of different types of commercial banks.Through the study,the following conclusions are drawn: non-performing asset securitization business can effectively improve the profitability of commercial banks.Specifically,non-performing asset securitization business improves the net return on assets of commercial banks,reduces the profit rate of sales,and increases the Asset turnover,which has no significant impact on the equity multiplier.At the same time,the impact is heterogeneous,and compared to state-owned commercial banks,joint-stock commercial banks are more able to profit from the securitization of non-performing assets.This business has significantly improved the Asset turnover of joint-stock commercial banks and reduced the profit rate of sales,but has limited impact on the financial indicators of state-owned commercial banks.Finally,based on empirical results and combined with the actual situation of China’s non-performing asset securitization market,this article proposes development suggestions from the banking,market,and regulatory levels.