Determinants affecting the profitability of commercial banks listed on the stock market of Vietnam
Main Article Content
Abstract
This study aims to examine the impact of factors affecting the profitability of 25 commercial banks listed on the Vietnamese stock market in the period from 2010 to 2020. The results of the Feasible Generalized Least Square (FGLS) show that bank size, liquidity risk, economic growth, and inflation positively impact profitability. In contrast, cost-to-income, financial leverage, and credit risk have negative impacts on the profitability of Vietnamese commercial banks. From the results, we suggest several policy implications to help banks improve profitability, including increasing size and liquidity, controlling the use of financial leverage, and strengthening loan supervision and cost management. Bank profitability is not only affected by internal factors but also by external factors. The macroeconomic environment, such as economic growth and inflation, affects a bank's profitability. Therefore, to increase profitability, commercial banks need to focus on not only controlling internal factors but also based on the external macroeconomic situation to make appropriate adjustments.
Article Details
Keywords
Profitability, Commercial bank, FGLS
References
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Angbazo, L. (1997). Commercial Bank Interest Margins, Default Risk, Interest-rate Risk, and Off-balance Sheet Banking. Journal of Banking and Finance, 21(1), 55- 87.
Athanasoglou, P. P., Delis, M. D. & Staikourasb, C. K. (2006). Determinants of Bank Profitability in the South Eastern European Region. Journal of Financial Decision Making, 2(2), 01-17.
Barajas, A., Steiner, R. & Salazar, N. (1999). Interest Spreads in Banking in Colombia 1974-96. IMF Staff Papers, 46(2), 1-148.
Barros, C. P. & Borges, M. R. (2011). Measuring performance in the Portuguese banking industry with a Fourier regression model. Applied Economics Letters, 18(1), 21-28.
Berger, A. N. (1995). The Relationship between Capital and Earnings in Banking. Journal of Money, Credit and Banking, 27(2), 432-456.
Berger, A.N., DeYoung, R., Genay, H. & Udell, G. (2000). Globalization of Financial Institutions: Evidence from cross-border banking performance. In: Litan RE, Santomero A.M. (eds). Bookings-Wharton Papers on Financial Services. Washington, DC: Brookings Institution Press, 23-158.
Bikker, J.A. & Hu, H. (2002). Cyclical Patterns in Profits, Provisioning and Lending of Banks and Procyclicality of the New Basel Capital Requirements. Banca Nazionale del Lavoro Quarterly Review, 55(221), 143-175.
Bourke, P. (1989). Concentration and other determinants of bank profitability in Europe, North America and Australia. Journal of Banking & Finance, 13(1), 65-79.
Borio, C., Gambacorta, L., & Hofmann, B. (2017). The influence of monetary policy on bank profitability. International Finance, 20(1), 48–63.
Bunyaminu, A.; Yakubu, I. N and Bashiru, S. (2021). The effect of financial leverage on profitability: An empirical analysis of recapitalized banks in Ghana. International Journal of Accounting and Finance Review, 7(1), 93-102.
Demirgüç-Kunt, A. & Huizinga, H. (1999). Determinants of Commercial Bank Interest Margins and Profitability: Some International Evidence. The World Bank Economic Review, 13(2), 379-408.
Dietrich, A. & Wanzenried, G. (2009). What Determines the Profitability of Commercial Banks? New Evidence from Switzerland. 12th Conference of the Swiss Society for Financial Market Researches, Geneva.
Dietrich, A. & Wanzenried, G. (2011). Determinants of bank profitability before and during the crisis: Evidence from Switzerland. Journal of International Financial Markets, Institutions and Money, 21(3), 307-327.
Doliente, J.S. (2005). Determinants of bank interest margins in South East Asia. Applied Financial Economics Letters, 1(1), 53-57.
Guru, B.K., Staunton, J. & Balashanmugam, B. (1999). Determinants of Commercial Bank Profitability in Malaysia. 12th Annual Finance and Banking Conference, Sidney.
Halkos, G., & Georgiou, M. (2005). Bank sales, spread and profitability: an empirical analysis. Applied Financial Economics Letters, 1(5), 293-296.
Hasan, M.S.A; Manurung, A.H & Usman, B. (2020). Determinants of Bank Profitability with Size as Moderating Variable. Journal of Applied Finance & Banking, 10(3), 1-7.
Heibati, F., Seid Noorani, M. & DadKhah, S. (2009). Evaluation of private banks compared to banks performance of countries around Arabic Gulf. Journal of Economic, 6, 91-108.
Hồ Thị Hồng Minh và Nguyễn Thị Cành (2015). Đa dạng hóa thu nhập và yếu tố tác động đến khả năng sinh lời các NHTM Việt Nam. Tạp chí Công nghệ Ngân hàng, 106+107, 13-23.
Kalluru, S.R. & Bhat K.S. (2008). An Empirical Analysis of Profitability Determinants in Indian Commercial Banks during Post Reform Period. ICFAI Journal of Industrial Economics, 5(4), 37-56.
Karimzadeh, M., Akhtar, S. J. & Karimzadeh, B. (2013). Determinants of profitability of banking sector in India. Transition Studies Review, 20(2), 211–19.
Kosmidou, K. (2008). The determinants of banks’ profits in Greece during the period of EU financial integration. Managerial Finance, 34(3), 146 - 159.
Koroleva, E., Jigeer, S., Miao, A. & Skhvediani, A. (2021). Determinants Affecting Profitability of State-Owned Commercial Banks: Case Study of China. Risks, 9(150), 1-19.
Mamatzakis, E. C. & Remoundos, P. C. (2003). Determinants of Greek Commercial Banks Profitability, 1989 – 2000. Spoudai, 53(1), 94-94.
Maness, T.S., and Zietlow, J.T. (2005). Short-Term Financial Management. 3rd Edición. Mason: South-Western.
Mohamad Akbar Noor Mohamad Noor (2012). The Determinants Efficiency and Profitability of Islamic Banks: An Empirical Study in 25 Countries. Lambert Academic Publishing.
Nguyễn Phạm Nhã Trúc và Nguyễn Phạm Thiên Thanh (2016). Các nhân tố tác động đến khả năng sinh lời hệ thống NHTM tại Việt Nam. Tạp chí Kinh tế và Phát triển, 228 (tháng 6/2016), 52-59.
Olweny, T. & Shipho, T.M. (2011). Effects of banking sectoral factors on the profitability of commercial banks in Kenya. Economics and Finance Review, 1(5), 01-30
Ong, T.S. & Teh, B.H. (2013). Factors affecting the profitability of Malaysian commercial banks. African Journal of Business Management, 7(8), 649-660.
Pasiouras, F. & Kosmidou, K. (2007). Factors influencing the profitability of domestic and foreign commercial banks in the European Union. Research in International Business and Finance, 21(2), 222–237.
Perry, P. (1992). Do Banks Gain or Lose From Inflation? Journal of Retail Banking, 14(2), 25-30.
Revell, J.R.S. (1980). Costs and margins in banking: an international survey. Paris: Organization for Economic Co-operation and Development.
Rose, P. & Hudgins, S. C. (2012). Bank Management and Financial Services. New York: McGraw Hill; 9th edition.
Short, B. (1979). The relation between commercial bank profit rates and banking concentration in Canada, Western Europe and Japan. Journal of Banking and Finance, 3(3), 209-219.
Sufian, F. & Habibullah, M. S. (2009). Determinants of bank profitability in a developing economy: Empirical evidence from Bangladesh. Journal of Business Economics and Management, 10(3), 207-217.
Ul Mustafa, A.R., Riaz, H.A. & Muhammad, U.Y. (2012). Does the loan loss provision affect the banking profitability in case of Pakistan? Asian Economic and Financial Review, 2(7), 772–83.
Acaravci, S.K. & Ahmet, E.C. (2013). Turkish banking sector’s profitability factors. International Journal of Economics and Financial Issues, 3(1), 27–41.
Alper, D. & Anbar, A. (2011). Bank Specific, Macroeconomic Determinants of Commercial Bank Profitability: Empirical Evidence from Turkey. Business and Economics Research Journal, 2(2), 139-152.
Angbazo, L. (1997). Commercial Bank Interest Margins, Default Risk, Interest-rate Risk, and Off-balance Sheet Banking. Journal of Banking and Finance, 21(1), 55- 87.
Athanasoglou, P. P., Delis, M. D. & Staikourasb, C. K. (2006). Determinants of Bank Profitability in the South Eastern European Region. Journal of Financial Decision Making, 2(2), 01-17.
Barajas, A., Steiner, R. & Salazar, N. (1999). Interest Spreads in Banking in Colombia 1974-96. IMF Staff Papers, 46(2), 1-148.
Barros, C. P. & Borges, M. R. (2011). Measuring performance in the Portuguese banking industry with a Fourier regression model. Applied Economics Letters, 18(1), 21-28.
Berger, A. N. (1995). The Relationship between Capital and Earnings in Banking. Journal of Money, Credit and Banking, 27(2), 432-456.
Berger, A.N., DeYoung, R., Genay, H. & Udell, G. (2000). Globalization of Financial Institutions: Evidence from cross-border banking performance. In: Litan RE, Santomero A.M. (eds). Bookings-Wharton Papers on Financial Services. Washington, DC: Brookings Institution Press, 23-158.
Bikker, J.A. & Hu, H. (2002). Cyclical Patterns in Profits, Provisioning and Lending of Banks and Procyclicality of the New Basel Capital Requirements. Banca Nazionale del Lavoro Quarterly Review, 55(221), 143-175.
Bourke, P. (1989). Concentration and other determinants of bank profitability in Europe, North America and Australia. Journal of Banking & Finance, 13(1), 65-79.
Borio, C., Gambacorta, L., & Hofmann, B. (2017). The influence of monetary policy on bank profitability. International Finance, 20(1), 48–63.
Bunyaminu, A.; Yakubu, I. N and Bashiru, S. (2021). The effect of financial leverage on profitability: An empirical analysis of recapitalized banks in Ghana. International Journal of Accounting and Finance Review, 7(1), 93-102.
Demirgüç-Kunt, A. & Huizinga, H. (1999). Determinants of Commercial Bank Interest Margins and Profitability: Some International Evidence. The World Bank Economic Review, 13(2), 379-408.
Dietrich, A. & Wanzenried, G. (2009). What Determines the Profitability of Commercial Banks? New Evidence from Switzerland. 12th Conference of the Swiss Society for Financial Market Researches, Geneva.
Dietrich, A. & Wanzenried, G. (2011). Determinants of bank profitability before and during the crisis: Evidence from Switzerland. Journal of International Financial Markets, Institutions and Money, 21(3), 307-327.
Doliente, J.S. (2005). Determinants of bank interest margins in South East Asia. Applied Financial Economics Letters, 1(1), 53-57.
Guru, B.K., Staunton, J. & Balashanmugam, B. (1999). Determinants of Commercial Bank Profitability in Malaysia. 12th Annual Finance and Banking Conference, Sidney.
Halkos, G., & Georgiou, M. (2005). Bank sales, spread and profitability: an empirical analysis. Applied Financial Economics Letters, 1(5), 293-296.
Hasan, M.S.A; Manurung, A.H & Usman, B. (2020). Determinants of Bank Profitability with Size as Moderating Variable. Journal of Applied Finance & Banking, 10(3), 1-7.
Heibati, F., Seid Noorani, M. & DadKhah, S. (2009). Evaluation of private banks compared to banks performance of countries around Arabic Gulf. Journal of Economic, 6, 91-108.
Hồ Thị Hồng Minh và Nguyễn Thị Cành (2015). Đa dạng hóa thu nhập và yếu tố tác động đến khả năng sinh lời các NHTM Việt Nam. Tạp chí Công nghệ Ngân hàng, 106+107, 13-23.
Kalluru, S.R. & Bhat K.S. (2008). An Empirical Analysis of Profitability Determinants in Indian Commercial Banks during Post Reform Period. ICFAI Journal of Industrial Economics, 5(4), 37-56.
Karimzadeh, M., Akhtar, S. J. & Karimzadeh, B. (2013). Determinants of profitability of banking sector in India. Transition Studies Review, 20(2), 211–19.
Kosmidou, K. (2008). The determinants of banks’ profits in Greece during the period of EU financial integration. Managerial Finance, 34(3), 146 - 159.
Koroleva, E., Jigeer, S., Miao, A. & Skhvediani, A. (2021). Determinants Affecting Profitability of State-Owned Commercial Banks: Case Study of China. Risks, 9(150), 1-19.
Mamatzakis, E. C. & Remoundos, P. C. (2003). Determinants of Greek Commercial Banks Profitability, 1989 – 2000. Spoudai, 53(1), 94-94.
Maness, T.S., and Zietlow, J.T. (2005). Short-Term Financial Management. 3rd Edición. Mason: South-Western.
Mohamad Akbar Noor Mohamad Noor (2012). The Determinants Efficiency and Profitability of Islamic Banks: An Empirical Study in 25 Countries. Lambert Academic Publishing.
Nguyễn Phạm Nhã Trúc và Nguyễn Phạm Thiên Thanh (2016). Các nhân tố tác động đến khả năng sinh lời hệ thống NHTM tại Việt Nam. Tạp chí Kinh tế và Phát triển, 228 (tháng 6/2016), 52-59.
Olweny, T. & Shipho, T.M. (2011). Effects of banking sectoral factors on the profitability of commercial banks in Kenya. Economics and Finance Review, 1(5), 01-30
Ong, T.S. & Teh, B.H. (2013). Factors affecting the profitability of Malaysian commercial banks. African Journal of Business Management, 7(8), 649-660.
Pasiouras, F. & Kosmidou, K. (2007). Factors influencing the profitability of domestic and foreign commercial banks in the European Union. Research in International Business and Finance, 21(2), 222–237.
Perry, P. (1992). Do Banks Gain or Lose From Inflation? Journal of Retail Banking, 14(2), 25-30.
Revell, J.R.S. (1980). Costs and margins in banking: an international survey. Paris: Organization for Economic Co-operation and Development.
Rose, P. & Hudgins, S. C. (2012). Bank Management and Financial Services. New York: McGraw Hill; 9th edition.
Short, B. (1979). The relation between commercial bank profit rates and banking concentration in Canada, Western Europe and Japan. Journal of Banking and Finance, 3(3), 209-219.
Sufian, F. & Habibullah, M. S. (2009). Determinants of bank profitability in a developing economy: Empirical evidence from Bangladesh. Journal of Business Economics and Management, 10(3), 207-217.
Ul Mustafa, A.R., Riaz, H.A. & Muhammad, U.Y. (2012). Does the loan loss provision affect the banking profitability in case of Pakistan? Asian Economic and Financial Review, 2(7), 772–83.