Non‐interest Income, Profit, and Risk Efficiencies: Evidence from Commercial Banks in China

Bian, Wenlong; Wang, Xiangnan; Sun, Qing

doi:10.1111/ajfs.12112

Cited by 33 publications

(27 citation statements)

References 58 publications

(97 reference statements)

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“…There have been many studies about increasing non-interest income by measuring the impact of non-interest activities on the performance of commercial banks. Studies supporting the trend of increasing non-interest income of commercial banks will increase bank performance as stated by De Young and Rice (2004) and Bian et al (2015). Research by Alaaeddin et al (2017) showed that non-interest income enhances equity and this has a positive effect on profitability.…”

Section: Introductionmentioning

confidence: 88%

Analysis of the impact from non-interest income to the operational efficiency of commercial banks in Vietnam

Sang¹,

Thanh²

2020

10.5267/j.msl

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Section: Introductionmentioning

confidence: 88%

Analysis of the impact from non-interest income to the operational efficiency of commercial banks in Vietnam

Sang¹,

Thanh²

2020

10.5267/j.msl

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“…Non-interest income, including commission fee, and trading income, has become an essential part of bank income all over the world, and China is no exception. In fact, due to the abolishment of floor and ceiling of lending and deposit rate and the development of non-bank institutions, traditional deposits accepting and loans lending business will certainly contribute lower profit ratio in Chinese commercial banks (Bian et al 2015).…”

Section: Non-interest Incomementioning

confidence: 99%

“…The China Banking Regulatory Commission, which was established in 2003 to take up the responsibility of regulating the bank industry, publishedThe Guide for Implementing the Basel IIin 2007 (Bian et al 2015). Issued by the Basel Committee on Banking Supervision, the Basel Accord is a set of recommendations of banking regulations.…”

Section: Capital Adequacy Ratiomentioning

confidence: 99%

“…However recently, the proportion of the non-interest income has enlarged among the sales revenue yearly. At present, the largest percentage of the non-interest income of a bank is up to 40% (Bian, Wang, & Sun, 2015). In recent years, Chinese banks have begun to broaden the invested capital on non-interest income, which is a high-return-rate, substantial and safe operation.…”

Section: Non-interest Incomementioning

confidence: 99%

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Examining the Internal Determinants of Profitability of Commercial Banks in China: A Panel Data Modeling Based Empirical Study

2020

International Journal of Managerial Studies and Research

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Bank of China (ABC), Bank of China (BOC), China Construction Bank (CCB, previously called People's Bank of Construction), and Industrial and Commercial Bank of China (ICBC). In 1984, China completed the establishment of a two-tier banking system to replace its previous mono-bank system: the first tier is the central bank, People's Bank of China, and the second tier includes other banks and non-bank financial institutions (García-Herrero et al. 2006). However, problems aroused due to insufficient competition and policy burden on the four specialized banks with the nonperforming loan ratios as high as about 30 percent in the early 1990s. Through the mid-1990s, the second stage of bank reform was implemented. Specialized banks were commercialized, and regulations were improved. To enhance competition, joint-stock commercial banks (JSCBs) and private banks were encouraged by the government. Foreign banks gradually could be authorized to expand in Chinese market (Okazaki 2007). At the end of 1990s, especially with China's WTO accession in 2001, rules, regulations, and laws started to alter again, and China promised to reducelimitations on ownership takeovers, have more fair tax treatmentsto different banks, and liberalizeloan and deposit interest rates. As a strategy of stateowned commercial bank (SOCB) reform, non-performing loans must be taken over, so four asset management companies were set up to fulfill this role in 1999(Wang 2008). Then, strategic foreign investors were introduced. For example, HSBC (Hong Kong and Shanghai Banking Corporation) acquired 19.9% of the

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“…Noninterest income has become a legitimate activity of banks; indeed, according to DeYoung and Rice (2003), such income now makes up 40% of all operating income in the commercial banking industry of the United States. More and more banks are dependent on non-interest income to increase revenue and profit (Bian et al, 2015). The Vietnam banking system is also working to increase its proportion of noninterest income, but its ability to do so is relatively undeveloped.…”

Section: Introductionmentioning

confidence: 99%

The Impact of Noninterest Income on the Profitability of Commercial Banks in VietNam: Evidence of Non-Linear Relationship

Nguyen¹

2020

IJEF

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This paper uses the Generalized Method Of Moments (GMM) to analyze the impact of noninterest income on the profitability of 28 Vietnamese commercial banks in the period from 2010 to 2018. At the same time, the Threshold Regression Model is applied on a panel data to evaluate whether or not there is a non-linear relationship between the noninterest income ratio and bank’s profitability. The results have shown that the optimal diversification benefit can be attained by reaching a certain level of non-interest income proportion. The findings of the study are: (1) The existence of two thresholds shows that there is non-linear relationship, confirming the non-linear relationship between the noninterest income ratio (NII) and profitability (ROA); (2) The noninterest income ratio impacts negatively on profitability (ROA) when NII (≤44.16% and ≥ 46.62%), when the noninterest income ratio is between 44.16% and 46.12% the relationship is positive. The noninterest income ratio ranging from 44.16% to 46.62% is called optimal when this ratio is in a positive correlation with profitability, which means that Vietnamese commercial banks can try to increase their profits by increasing NII and maintaining that level to get exploiting their maximum level of diversification from noncredit income.

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Non‐interest Income, Profit, and Risk Efficiencies: Evidence from Commercial Banks in China

Cited by 33 publications

References 58 publications

Analysis of the impact from non-interest income to the operational efficiency of commercial banks in Vietnam

Analysis of the impact from non-interest income to the operational efficiency of commercial banks in Vietnam

Examining the Internal Determinants of Profitability of Commercial Banks in China: A Panel Data Modeling Based Empirical Study

The Impact of Noninterest Income on the Profitability of Commercial Banks in VietNam: Evidence of Non-Linear Relationship

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