Analysis on Size Effect to Commercial Banks Operation

1. Analysis on Size Effect to Commercial Banks Operation —Based on comparisons of CHINA CONSTRUCTION BANK and CHINA CITIC BANK

2. 一、Analysis on assets structure 二、Analysis on liability structure 三、Analysis on income structure 四、Comparisons on the performances

3. 一、Analysis on assets structure

4. 一、Analysis on assets structure 20 Balance sheet of CHINA CONSTRUCTION BANK 7 Balance sheet of CHINA CITIC BANK

5. Loans • Every bank depends on the interest income from loans to make profits. • But the small banks seems to rely on loans more than large banks do.

6. Cash

7. Cash Cash and deposits with central banks ash and deposits with central banks 17.25% • Large bank is always faced with large number of money withdrawal, so it has to prepare more cash and deposits with center bank.

8. 二、Analysis on liability structure

9. 二、Analysis on liability structure balance sheet of CHINA CONSTRUCTION BANK • balance sheet of CHINA CITIC BANK

10. Deposit People think large bank has more credit and more stable Deposits from customers To decrease their risk and meet their withdrawal, people choose the large bank The large bank has more deposits from customers

11. Deposit the amounts under repurchase agreements

12. Liability Debt securities payable small bank should take more active actions to raise money

13. 三、Analysis on income structure

14. 三、Analysis on income structure Net Interest Income Many bank has developed their intermediary business to deal with the change of the interest rate. reasons Small banks can’t develop its off-balance sheet business as well as large bank, so it still depend on its traditional business.

15. Difference China Construction Bank China Citic Bank large commission income large expenses operating income large total comprehensive income large operating income 7 or 8 times large net fee impairment losses

16. 四、Comparisons on the performances

17. 四、Comparisons on the performances

18. ROA

19. ROE EM ROE=ROA*EM • EM was decreasing,means financial leverage and risk were dropping. • The ROE of the two banks were growing. • The growth potential of ROE should benefit from the growth of ROA. • The growth rate of China Citic Bank was faster. • Despite the leverage was decreasing, the net interest income was increasing.

20. NIM In 2008, China Citic Bank's NIM was lower than the Construction Bank. But since 2009, it was more than the construction bank, and kept an increasing growth rate. • NIM mirrors a bank's profitable assets of profitability.The higher the index, the stronger profitability is. • The small banks more depend on deposit.

21. NIM

22. ES • ES can measure the effectiveness of a financial firm's intermediation function in borrowing and lending money and also shows us the intensity of competition in the firm's market. • After the financial crisis, China Citic Bank gradually returned to the business operation level in 2008.But recovery speed of China Construction Bank ES was hard.

24. Loan to deposit ratio • Loan to deposit ratio measures how much the balance is used to send back loans, the higher proportion, the worse the bank's liquidity. • It also reflects the banks' courage to create liability for a capital operation positively. • If the other factors constant, the higher loan-to-deposit ratios indicate the higher efficiency and the stronger profitability of bank assets.

25. Loan to deposit ratio • The growth of Loan to deposit reflected the extraordinary pressure of increasing deposits for banks. • Due to the powerful deposit-taking ability and strict control of the liquidly risk, the loan-to-deposit ratio of Construction Bank was lower than the Citic Bank. • The Construction bank is facing with the higher risk of deposit outflows and greater need for loans.

26. NPL • In comparison with China Citic Bank, whose response of it was slower, has leaved the historical problem.

27. There are several underlying issues remain open to question: • First, the capital market system reform. • Second, the adjustment of the interest rate, the narrowing of the spreads, the increasing interest rate risk for commercial banks. • Third, the banks' operation and management level are not good enough, as well as the risk prevention capacity.

28. In conclusion The performance of a large bank is better than the small bank form the table. But a small bank may has more creativity and innovation. With the fiercer competition, both of large banks and small banks ought to change their structure of assets and liability to reduce the risk, compete with others and stand out.

29. Thank you~ 小组成员：巩成华 张语楠 杨晨茜 郑越 邱云