BUSN20019 - Impact of Net Interest Margin on Chinese Commercial Banks

This report investigates the influence of the Net Interest Margin (NIM) on the profitability of commercial banks in China. The research focuses on how NIM, calculated based on interest rate spreads and market dynamics, affects the financial performance of these banks. The study utilizes the Ho and Saunders model to categorize the factors impacting NIM, analyzing secondary data to understand market trends and competition. The report addresses the research question of how low-interest rates impact customer deposit margins within the Chinese commercial banking sector. The analysis incorporates data from 16 Chinese banks and includes references to relevant academic sources, providing a comprehensive overview of NIM's role in the Chinese banking system. The report also explores the weakening market conditions and the increasing competition among commercial banks in China as indicated by the declining trend in NIM. The report is based on the BUSN20019 course and the provided assignment brief.

Analysis of the impact of
the net interest margin on
the profit of the commercial
banks in China

Field of Research
 The following research is based on the possible impact
that Net Interest Margin creates on the profit of registered
banks in China.
 The research is carried out based on the commercial
banks of China and is applied to the Ho, and Saunders
model to categorize the essentials disturbing the Net
Interest Margin.

Net Interest Margin
Net Interest margin is demarcated as a degree to indicate the
alteration amid the rate of interest that is generated by any bank
to the interest sum that is paid out to the lenders as for example
the credits or the assets related to interest earnings.

Secondary data
 The Net Interest margin is calculated based on the actual net
interest margin counting its pure interest margin and the extension
margin that is initiated by the abrasion in the market.
 As per the table shown above, the index for the banks in China
shows a decline in the trend between all the sixteen bank samples
in China. The table reveals the weakening of the market while
growing rate of competition among the commercial banks of China.

Secondary data
https://www.ey.com/Publication/vwLUAssets/ey-china-listed-banking-rep
ort-2017-en/$FILE/ey-china-listed-banking-report-2017-en.pdf

Research Question
What are the effects of low interest rate
on the margin for customer deposit in the
Chinese commercial banks?

References
Boateng, A., Huang, W., & Kufuor, N. K. (2015). Commercial
bank ownership and performance in China. Applied
Economics, 47(49), 5320-5336.
Dong, Y., Firth, M., Hou, W., & Yang, W. (2016). Evaluating the
performance of Chinese commercial banks: A comparative
analysis of different types of banks. European Journal of
Operational Research, 252(1), 280-295.
Qi, M., & Zhang, J. (2018). What Determines Interest Margins?
The Case of Chinese Banks. In Contemporary Issues in
Banking (pp. 239-251). Palgrave Macmillan, Cham.