A Ratio Analysis of China Banks

li, yueyang (2015) A Ratio Analysis of China Banks. [Dissertation (University of Nottingham only)]

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Abstract

Motivation. This study was motivated by the important role that Chinese banks play in the financial

system of China. This role is higher than in many other developed and developing countries, because

unlike in many other countries, in China banking system provides much more financing to the

economy than its stock market. Also, Chinese banks recently became the top-ranking banking

organizations globally in international bank rankings. In year 2007 no Chinese bank was in the list of

top-10 banks by their pre-tax profit, but already in 2008 five banks from China stepped into the list

and two of these banks led the ranking.

Key research question. The key research question of this study is how financial performance, financial

position, quality of loan portfolio of Chinese banks changed after the global financial crisis of 2007 -

2009? Another important question is to identify the significant and important determinants of the

performance of Chinese banks.

Methodology. Methodology of this study is based on the list of nine financial banking ratios that

describe financial performance of the banks in a comprehensive manner. Included into the analysis

are the ratios that describe profitability, liquidity, efficiency, financial leverage, quality of loan

portfolio and its performance, and relative size of loan portfolio. Three types of empirical analysis

are used in this study – dynamic analysis of the mean financial ratios, testing of the difference

between the mean ratios for the crisis period versus the mean ratios in the after-crisis period; and

regression analysis of the determinants of ROA and ROE of Chinese banks in the period during the

global financial crisis and in the period after the crisis. Regression methodology uses panel data

estimation methodology, as well as cross section estimation. The former is based on the averaged

across time financial ratios for each bank and the two time period s are considered – 2007-2009 as

the crisis period and 2010-2014 as the post-crisis period.

Data. The data for this investigation was obtained from specialized well-recognized international

financial database Bankscope that is maintained by Bureau van Dijk. Data was collected for 239

Chinese banks over the period from year 2007 to 2014 inclusively.

The key results of the study show that the key changes that occurred to Chinese banks during the

crisis were the twofold increase in the ratio of non-performing loans, decrease in the debt to total

assets ratio, decrease in the NIM ratio, and also significant contraction in the ratio of net loans to

total assets. Also, ROA is positively related to NIM, assets turnover, interest cover, and debt ratio.

Item Type: Dissertation (University of Nottingham only)
Depositing User: LI, YUEYANG
Date Deposited: 23 Mar 2016 15:12
Last Modified: 22 Oct 2016 17:04
URI: http://eprints.nottingham.ac.uk/id/eprint/29872

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