What Is a Non-Interest Income?

Non-interest income refers to the operating income of commercial banks in addition to interest margin income, which is mainly income from intermediate business income and consulting and investment activities. The income composition of different commercial banks is different. As far as the current income structure of Chinese banks is concerned, interest income still occupies the majority, and generally accounts for more than 80% of the main income. However, interest income is greatly affected by changes in interest rates and the economic cycle. It has unstable cyclical characteristics and has a high risk of bad debts. Therefore, in recent years, domestic banks have begun to increase their investment in non-interest income business. This business is relatively stable, secure, and generally has higher profit margins.

Non-interest income

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Non-interest income business generally consists of three parts: one is processing business, after the customer engages in various transactions, the bank assists them to complete the receipt and payment of funds and the bank engages in certain transactions on behalf of the customer; Various transactions in the financial market;

For a long time, the income of Chinese commercial banks mainly comes from the spread of deposits and loans, and the proportion of non-interest income is very low. As China's banking industry continues to accelerate its pace of opening up to the outside world, competition in the banking industry is becoming increasingly fierce, and deposit and loan spreads will continue to shrink. In this case, if commercial banks want to maintain and increase their income and win in the competition, they must find new sources of income. Non-interest income business is an important choice. How to expand

Comparison of valuation levels of listed banks

The development of non-interest income business is an urgent issue for banks in China. At present, the importance of non-interest income business has been gradually accepted by Chinese banks, and various banks have taken various measures to develop such businesses. In order for non-interest income businesses to run smoothly, banks must develop and implement appropriate strategies. Drawing on the experience of developed countries and combining with China's realities, in the future, the non-interest income business of Chinese banks should be innovative from the following aspects:

Non-interest income business type innovation

In terms of type innovation, Bank of China's non-interest income business should adopt the strategy of processing business, supplemented by consulting business, create conditions to gradually engage in trading business, and diversify the types of non-interest income business.

Processing business

It is the most basic non-interest income business of banks. At present, most of our businesses in China allow banks to be legal and policy-driven. In addition, these businesses are generally simple in handling procedures, do not require excessive equipment and complicated technology, and do not require too much knowledge and ability of bank employees. In fact, some of the processing business, such as check processing and letter of credit collection, have been handled by Chinese banks for many years and have accumulated rich experience.

Comparison of business income structure

Consulting business

It is more complicated to handle. It requires bankers to have profound knowledge, understand all aspects of the financial and non-financial fields, have a strong comprehensive ability and be familiar with various operating technologies. At present, many banks' employees do not have these conditions and should be cultivated and introduced as soon as possible. In addition, these businesses are currently subject to certain restrictions in some aspects. Large-scale development will take some time, so it is difficult to provide banks with a large amount of revenue in the short term. Banks should now start to engage in businesses within their capabilities, such as personal financial consulting, corporate financing consulting, etc., rather than wait until conditions are fully met.

Transaction business

Most of the transaction businesses are currently not available for Chinese banks, such as stock trading and risky asset transactions. Therefore, these businesses cannot become the main component of China's non-interest income business. However, this type of business is a trading activity undertaken by the bank for itself, and if done properly, its revenue is considerable, far exceeding the other two businesses. Therefore, banks should pay full attention to such businesses, actively create conditions, and strive to win. Some businesses, such as asset securitization, can now be tried.

Non-interest income business method innovation

Deposits, deposits, and remittances are the most traditional businesses that banks engage in. Through these businesses, banks have established relationships with many customers, and customers are highly dependent on these businesses. In the non-interest income business expansion process, banks should make full use of such resources. In the process of corporate and personal deposit business, banks can vigorously promote credit cards, commercial debits, brokerage services, escrow services, asset services, various consulting services, etc., to make customers familiar with and accept these businesses; In the process of personal loan issuance, banks have greater initiative and influence, and can use this advantageous position to promote non-interest income business. For example, when issuing loans, introduce customers to credit card, brokerage business, corporate investment consulting, personal financial planning and other businesses. ^[1]