The Profit-Valuation Disconnect of Chinese Listed Banks: Empirical Evidence from Non-Interest Income (2015–2024)

Xiongtu Lin; Jennifer M. Perez

doi:10.63313/EBM.9216

Authors

Xiongtu Lin Graduate School, College of Accountancy, Business, Economics and International Hospitality Management, Batangas State University, Batangas City, Philippines Author
Jennifer M. Perez Graduate School, College of Accountancy, Business, Economics and International Hospitality Management, Batangas State University, Batangas City, Philippines Author

DOI:

https://doi.org/10.63313/EBM.9216

Keywords:

Non-interest income, Public Listed banks, ROE, Market capitalization, Prof-it-Valuation Disconnect

Abstract

Interest rate liberalization pressures Chinese listed banks to expand non-interest in-come, yet prior research overlooks capital-market valuation responses. Using a bal-anced panel of 24 A-share banks (2015–2024, 240 observations) with two-way fixed-effects regressions, we find that non-interest income ratio (NIIR) significantly boosts ROE (β=0.055, p=0.003) but has no significant effect on market capitalization (p=0.304). Mechanism analysis reveals that investors view fee-based income as pas-sive compensation for shrinking spreads, not sustainable growth, thus denying valua-tion premiums. Credit risk and net interest margins remain key drivers for both prof-its and market prices. This study constructs a dual "accounting profit + market valua-tion" framework, filling a gap in diversification literature, and offers strategic impli-cations for bank management, investors, and regulators to prioritize quality over scale in non-interest businesses.

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