OPERATING RATIO AND BANK PERFORMANCE IN CHINA

Abstract

As a special industry that operates currency, banks have an irreplaceable position in the allocation of social resources and the promotion of stable social and economic development. This study focused on the relationship between operating ratios and the performance of Chinese listed banks. The operating ratio include cost to income ratio, net interest margin and non-interest expense ratio, and performance were measured by ROA and ROE. The unit of analysis of this research is organization and focus on the performance of Chinese listed banks. This research is a cross-sectional study using quantitative methods based on descriptive research and census was used in this study.

In the research of the relationship between the operating ratio and the performance of listed banks in China, the cost-income ratio has the significant negative relationship on bank performance. Net interest margin has a positive relationship to the performance of Chinese listed banks. This shows that an increase in the NIM ratio can improve bank performance. Non-interest expense ratio has a positive relationship with the performance of Chinese listed banks, but not significant. Chinese listed banks should reduce costs, increase income and adjust rely on net interest margin income to other businesses, and improve the bank's professionalism.