The Application of Factor Analysis Method in Performance Evaluation of Listed Banking Business

Abstract

Bank is the core of modern financial industry, and its development trend is related to the operation of the whole national economy. Bank efficiency and the level of bank performance are important factors affecting a country's economic security. Therefore, the performance of listed banks is the key issue of financial industry. In this paper, the performance level of 16 listed banks of China is analyzed with demonstration in the year of 2013. The paper evaluates the performance of listed banking business with factor analysis method by picking 11 indexes, and offers relevant countermeasures and suggestions. Introduction The discussion on the performance evaluation of banking industry has never ended since the application of DEA model in the bank performance through cost and profit by Farrell in 1957. For example, the Du Pont financial analysis system was applied into banking system in 1972; the FED founded more accurate CAMEL evaluation system in 1979. The research on the performance evaluation of banking industry began relatively late in China. Sun Jing (2009) [1] studied and analyzed the status quo of the performance evaluation system in western commercial bank; it’s concluded that the performance evaluation system of western commercial bank is designed for regulators so far with the purpose of ensuring the financial stability and safety coefficient. Yang En (2010) [2] drew the conclusion from analyzing the comprehensive performance of 14 Chinese listed banks that, from 2001 to 2008, the state-owned commercial banks was optimal in comprehensive performance, then the joint-stock commercial banks and city commercial banks with relatively worst performance; Tang Jinfeng (2012) [3] came to a conclusion through studying the relation of ownership structure and economic value added (EVA) of listed banks that there is a negative correlation relationship for the shareholding ratio in state-own shareholders and listed banks EVA, and positive correlation relationship in different degrees for the shareholding ratio in shareholders of public shares and corporate shares. At present, the main performance evaluation methods of listed banks are Du Pont Approach, Economic Value Added (EVA), Balance Scorecard and Factor analysis. The influencing factors for the performance evaluation of listed banks Market structure. Bank market structure can be summarized as market share and concentration of 5th International Conference on Education, Management, Information and Medicine (EMIM 2015) © 2015. The authors Published by Atlantis Press 799 each bank; it reflects the inner link of various elements between provider and demander in the market. Bank scale. Bank scale includes total assets, total liabilities, savings and loan scale, the intermediary business scale, the number of employees and number of branches, etc. Business principles.The business principles of bank can be summed up as security, profitability, and “liquidity, which has a strong relationship and influence the bank performance in different degrees. The construction of performance evaluation indexes system in the listed banking industry In 2000, People's Bank of China designed , including 13 indexes; in 2004, the China Banking Regulatory Commission issued , including 17 indexes. The principles of constructing the performance evaluation indexes system of listed Chinese banks are: comprehensiveness, authenticity, importance, objectivity and availability of data. According to the factors which influence the listed bank performance, the paper chooses 11 indexes in four aspects reflecting the business performance such as market share capability, size, profitability and operation capacity, safety and growth; the market structure is mainly reflected in the market share capability, and the specific index is the ratio of net profit and ratio of total assets; the bank size is reflected by the three indexes: total debt ratio, deposit ratio and loan ratio; profitability and operation capacity is mainly shown as the earnings, and the two indexes are return on weighted assets and return on assets; safety shows its ability to avoid risks, and the two indexes are capital adequacy ratio and loan-deposit ratio; the growth includes growth rate of total assets and net profit. The 11 indexes are expressed by the variables 1 x 、 2 x 、 3 x 、 4 x 、 5 x 、 6 x 、 7 x 、 8 x 、 9 x 、 10 x and