Determinants of bank performance: Evidence from the commercial banks in Vietnam
Vol 8, Issue 16, 2024
VIEWS - 20 (Abstract) 10 (PDF)
Abstract
This study analyzes the influence of five primary factors—inflation, capital ratio, deposits, non-performing loans, and bank size—on the performance of banks in Vietnam. Our sample encompasses 26 commercial banks from 2014 to 2023. The analysis incorporates data sourced from commercial banks’ financial statements and annual reports. Our findings indicate that banks with higher capital ratios and sizes generally exhibit superior performance. Moreover, inflation positively influences the performance of Vietnamese commercial banks throughout the selected timeframe. In contrast, non-performing loans and deposits are inverse to bank performance. Our findings offer novel insights into the factors influencing bank performance in a growing economy like Vietnam, along with recommendations for Vietnamese commercial banks and the State Bank of Vietnam to implement effective methods to improve bank performance.
Keywords
Full Text:
PDFReferences
Albertazzi, U., & Gambacorta, L. (2009). Bank profitability and the business cycle. Journal of Financial Stability, 5(4), 393–409. https://doi.org/10.1016/j.jfs.2008.10.002.
Almansour, A. Y., Alzoubi, H. M., Almansour, B. Y., & Almansour, Y. M. (2021). The effect of inflation on performance: an empirical investigation on the banking sector in Jordan. Journal of Asian Finance, Economics and Business, 8(6), 0097–0102. https://doi. org/10.13106/jafeb.2021.vol8.no6.0097.
Arora, S., & Kaur, S. (2006). Financial performance of the Indian banking sector in the reforms era. The Indian Journal of Commerce, 59(1), 1–24.
Barros, C. P., Ferreira, C., & Williams, J. (2007). Analyzing the determinants of performance of best and worst European banks: A mixed logit approach. Journal of Banking and Finance, 31(7), 2189–2203. https://doi. org/10.1016/j.jbankfin.2006.11.010.
Berger, A. N. (1995). The Relationship between Capital and Earnings in Banking. Journal of Money, Credit and Banking, 27(2), 432. https://doi.org/10.2307/2077877
Berger, A., Mester, L.J. (2003). Explaining the dramatic changes in the performance of US banks: technological change, deregulation, and dynamic changes in competition. Journal of Financial Intermediation, 12, 57-95.
Berger, A.N., DeYoung, R., (1997). Problem loans and cost efficiency in commercial banks. J. Bank. Finance 21 (6), 849–870.
Berlin, M. (2012). Banks and markets: Substitutes, complements, or both? Business Review, Q2, pp. 1–10. https://fraser.stlouisfed.org/title/business-review-federal-reserve-bank-philadelphia-5580/second-quarter 2012-557761/banks-markets-522495
Bikker, J., & Hu, H. (2002). Cyclical patterns in profits, provisioning and lending of banks, and pro-cyclicality of the new Basel capital requirements. BNL Quarterly Review, 55(221), 143–175. http://ojs.uniroma1.it/ index.php/PSLQuarterlyReview/article/view/9907/ 9789.
Bourke, P. (1989). Concentration and other determinants of bank profitability in Europe, North America, and Australia. Journal of Banking and Finance, 13(1), 65–79.
Boyd, J. H., & Champ, B. (2006). Inflation, Banking, and Economic Growth. Federal Reserve Bank of Cleveland.
Cetin, H. (2019). Inflation and bank profitability: G20 countries banks panel data analysis. In Phuket, Thailand: 2019 international conference on management science and industrial engineering (pp. 168– 172)—association for Computing Machinery.
Chenini, H., & Jarboui, A. (2018). Analysis of the Impact of Governance on Bank Performance: Case of Commercial
Claessens, S., & Horen, N. V. (2014). The Impact of the Global Financial Crisis on Banking Globalization. International Monetary Fund.
Derbali, A. (2021). Determinants of the performance of Moroccan banks. Journal of Business and Socio-Economic Development, 1(1), 102–117. https://doi.org/10.1108/JBSED-01-2021-0003.
Djalilov, K., & Piesse, J. (2016). Determinants of bank profitability in transition countries: What matters most? Research in International Business and Finance, 38(3), 69–82. https://doi.org/10.1016/j.ribaf. 2016.03.015
Elnahass, M., Vu, Q. T., & Li, T. (2021). Global banking stability in the shadow of COVID-19 outbreak. Journal of International Financial Markets, Institutions, and Money, 72, Article 101322. https://doi.org/10.1016/j.intfin.2021.101322.
Elsas, R., Hackethal, A., & Holzhäuser, M. (2010). The anatomy of bank diversification. Journal of Banking and Finance, 34(6), 1274–1287. https://doi.org/10. 1016/j.jbankfin.2009.11.024.
European Commission (2024). Non-performing loans (NPLs), Retrieved from https://finance.ec.europa.eu/banking/non-performing-loans-npls_en#:~:text=Non%2Dperforming%20loans%2C%20or%20%E2%80%9C,of%20NPLs%20in%20their%20books. Accessed on 9th November, 2024.
Fadzlan, S. (2009). Determinants of bank profitability in a developing economy: Empirical evidence from the China banking sector. Journal of Asia-Pacific Business, 10(4), 201–307. https://doi.org/10.1080/ 10599230903340205
Ferrouhi, E. M. (2018). Determinants of banks’ profitability and performance: An overview. MPRA Paper, 89470, 1, 1–15. https://mpra.ub.uni-muenchen.de/89470/
Gazi, M. D. A. I., Alam, S. G. M., Hossain, A., Islam, S. M. N., Rahman, M. K., Nahiduzzaman, M. D., & Hos sain, A. I. (2022). Determinants of profitability in banking sector: Empirical evidence from Bangladesh. Universal Journal of Accounting and Finance, 9, 1377–1386. https://doi.org/10.13189/ujaf.2021.090616
Gilbert, B., & Jaya, S. (2019). Inflation and Profitability of Commercial Banks in Rwanda: A Case Study of Bank of Kigali. International Journal of Business and Management, 14(10), 35–43. https://doi.org/10.5539/ ijbm.v14n10p35
Gupta, N. & Mahakud, J. (2020). Ownership, bank size, capitalization, and bank performance: Evidence from India, Cogent Economics & Finance, 8:1, 1808282, DOI: 10.1080/23322039.2020.1808282.
Jara‐Bertin, M., Arias Moya, J., & Rodríguez Perales, A. (2014). Determinants of bank performance: evidence for Latin America. Academia Revista Latinoamericana de Administración, 27(2), 164-182. https://doi.org/10.1108/ARLA-04-2013-0030.
Lee, C-C. and Hsieh, M-F. (2013). The impact of bank capital on profitability and risk in Asian banking. Journal of International Money and Finance. 32, 251-281.
Mbabazize, R. N., Turyareeba, D., Ainomugisha, P., & Rumanzi, P. (2020). Monetary policy and profitability of commercial banks in Uganda. Open Journal of Applied Sciences, 10(10), 625–653. https://doi.org/10. 4236/ojapps.2020.1010044
Mercieca, S., Schaeck, K., & Wolfe, S. (2007). Small European banks: Benefits from diversification and the regulatory environment. Journal of Banking and Finance, 31(7), 1975–1998. https://doi.org/10.1016/j. jbankfin.2007.01.004
Miguel Á., T.-Z., Martínez, F. V., & Preciado, V. H. T. (2018). Effects of inflation on financial sector performance: New evidence from panel quantile regressions. Investigación Económica, LXXVII, (303), 94–129. https://doi.org/10.22201/fe.01851667p.2018.303. 64156.
Mkandawire, P (2016). An analysis of the determinants of bank performance in Malawi: A case of listed commercial banks, Online at https://mpra.ub.uni-muenchen.de/92392/ MPRA Paper No. 92392, posted 26 Feb 2019 09:44 UTC.
Muriu, P. (2023). What explains provisioning behaviour in the banking industry? Evidence from an emerging economy (Policy Brief No. 78). African Economic Research Consortium. https://publication.aercafricalibrary.org /handle/123456789/3658.
Nouaili, M. A., Abaoub, E., & Ochi, A. (2015). The determinants of banking performance in front of financial changes: Case of trade banks in Tunisia. International Journal of Economics and Financial Issues, 5(2), 410-417.
Phung, Q. T., Van Vu, H., & Tran, H. P. (2022). Do non-performing loans impact bank efficiency? Finance Research Letters, 46, 102393.
Qehaja-Keka, V., Ahmeti, S., & Aliu, M. (2023). Bank profitability determinants: Evidence from Kosovo and Albania. Journal of Liberty and International Affairs, 9(2). https://doi.org/10.47305/JLIA2392370qk.
Saeed, M. S. (2014). Bank-related, industry-related and macroeconomic factors affecting bank profitability: A case of the United Kingdom. Research journal of finance and accounting, 5(2), 42–50.
Satria, D. M., Harun, C. A., & Taruna, A. A. (2016). The macro-prudential aspects of the loan-to-deposit-ratio-linked reserve requirement. Applied Economics, 48(1), 24–34. https://doi.org/10.1080/00036846.2015.1073840.
Tan, Y. (2016). The impacts of risk and competition on bank profitability in China. Journal of International Financial Markets, Institutions & Money, 40(1), 85–110. https://doi.org/10.1016/j.intfin.2015.09.003
Trujillo-Ponce, A. (2012). What determines the profitability of banks? Evidence from Spain. Accounting and Finance, 53(2), 561–586. https://doi.org/10.1111/j.1467-629X.2011.00466.x
Tunisian Banks. Journal of the Knowledge Economy, 9(3), 871-895. https://doi.org/10.1007/s13132-016-0376-6.
White, L. H. (1999). The Theory of Monetary Institutions. Blackwell.
Yuan, D., Gazi, A. I., Harymawan, I., Dhar, B. K., & Hossain, A. I. (2022). Profitability determining factors of the banking sector: Panel data analysis of commercial banks in South Asian Countries. Frontiers in Psychology, p. 13, Article 1000412. https://doi.org/10.3389/fpsyg.2022.1000412.
DOI: https://doi.org/10.24294/jipd10205
Refbacks
- There are currently no refbacks.
Copyright (c) 2024 Tien Duc Ngo, Ha Thu Phung
License URL: https://creativecommons.org/licenses/by/4.0/
This site is licensed under a Creative Commons Attribution 4.0 International License.