Effect of non-interest income on profit: Evidence in Vietnamese commercial bank
Main Article Content
Abstract
Non-interest income is one of the important sources of income for the bank because it helps the bank reduce risk and increase operating profit. The study was conducted to find out the impact of non-interest income on the profitability of 22 Vietnamese commercial banks in the period from 2013 to 2022. The authors used FEM, REM methods to analyze the data. The research results show the asset size, the ratio of outstanding loans. loans/total assets, equity-to-total assets ratio and inflation are positively related to risk-adjusted return/return. In contrast, the ratio of operating expenses to total assets, the ratio of customer deposits to total liabilities have negative effects on risk-adjusted profit/return. In addition, bank asset size was found to be positively correlated with bank performance. From the obtained results, the study proposes solutions to increase this income, thereby improving the operational efficiency of the bank. The results of this study contribute to increasing empirical evidence on the contribution of non-interest income to bank profitability in developing countries
Article Details
Keywords
Commercial bank, Non-interest income, Profitability
References
Ahamed, M. M. (2017). Asset quality, non-interest income, and bank profitability: Evidence from Indian banks. Economic Modelling, 63, 1-14. https://doi.org/10.1016/j.econmod.2017.01.016
Ahmad, N., Naveed, A., Ahmad, S., & Butt, I. (2020). Banking sector performance, profitability, and efficiency: a citation‐based systematic literature review. Journal of Economic Surveys, 34(1), 185–218. https://doi.org/10.1111/joes.12346.This
Ali, M., & Puah, C. H. (2019). The internal determinants of bank profitability and stability: An insight from banking sector of Pakistan. Management Research Review, 42(1), 49–67. https://doi.org/10.1108/MRR-04-2017-0103
Chiorazzo, V., Milani, C., & Salvini, F. (2008). Income diversification and bank performance: Evidence from Italian banks. Journal of Financial Services Research, 33(3), 181–203. https://doi.org/10.1007/s10693-008-0029-4
Craigwell, R., & Maxwell, C. (2005). Non-interest income and financial performance at commercial banks in the Caribbean. In Research Department, Central Bank of Barbados, cited from www. ccmf-uwi. org/files/publications/conference/898. pdf on April (Vol. 10, p. 2012).
Finishtya, F. C. (2019). the Role of Cash Flow of Operational, Profitability, and Financial Leverage in Predicting Financial Distress on Manufacturing Company in Indonesia. Jurnal Aplikasi Manajemen, 17(1), 110–117. https://doi.org/10.21776/ub.jam.2019.017.01.12
Fred Nelson, O. N. (2020). The Impact of Credit Risk Management on the Profitability of a Commercial Bank: The Case of BGFI Bank Congo. International Journal of Economics and Finance, 12(3), 21-29 https://doi.org/10.5539/ijef.v12n3p21
Hausman, J. A. (1978). Specification tests in econometrics. Econometrica: Journal of the Econometric Society, 46(6), 1251-1271.
Hunjra, A. I., Zureigat, Q., Tayachi, T., & Mehmood, R. (2020). Impact of non-interest income and revenue concentration on bank risk in South Asia. Banks and Bank Systems, 15(4), 15–25. https://doi.org/10.21511/bbs.15(4).2020.02
Klein, P. G., & Saidenberg, M. R. (1998). Diversification, organization, and efficiency: Evidence from bank holding companies. Organization, and Efficiency: Evidence from Bank Holding Companies (May 1998). https://doi.org/10.2139/ssrn.98653
Klein, P. G., & Saidenberg, M. R. (2010). Organizational structure and the diversification discount: Evidence from commercial banking. Journal of Industrial Economics, 58(1), 127–155. https://doi.org/10.1111/j.1467-6451.2010.00409.x
Lê Long Hậu và Phạm Xuân Quỳnh (2017). Ảnh hưởng của thu nhập ngoài lãi đến hiệu quả kinh doanh của các ngân hàng thương mại Việt Nam giai đoạn 2006-2016. Tạp chí Ngân hàng, 9. https://tinyurl.com/29fcbyxm
Lepetit, L., Nys, E., Rous, P., & Tarazi, A. (2008). Bank income structure and risk: An empirical analysis of European banks. Journal of Banking and Finance, 32(8), 1452-1467.
Meslier, C., Tacneng, R., & Tarazi, A. (2014). Is bank income diversification beneficial? Evidence from an emerging economy. Journal of International Financial Markets, Institutions and Money, 31(1), 97–126. https://doi.org/10.1016/j.intfin.2014.03.007
O’Connell, M. (2022). Bank-specific, industry-specific and macroeconomic determinants of bank profitability: evidence from the UK. Studies in Economics and Finance. https://doi.org/10.1108/SEF-10-2021-0413
Hanif, M., Tariq, M., & Tahir, A. (2012). Comparative performance study of conventional and Islamic banking in Pakistan. International Research Journal of Finance and Economics, (83), 62-72
Hoàng Ngọc Tiến và Võ Thị Hiền (2010). Trao đổi về phương pháp tính tỷ lệ thu nhập ngoài tín dụng của ngân hàng thương mại. Tạp chí Công nghệ ngân hàng, 48, 36-39.
Hồ Thị Hồng Minh và Nguyễn Thị Cành (2015). Đa dạng hóa thu nhập và các yếu tố tác động đến khả năng sinh lời của các Ngân hàng thương mại Việt Nam. Tạp chí Công nghệ Ngân hàng, 106+107, 13-24.
Pennathur, A., & Vishwasrao, S. (2014). The financial crisis and bank-client relationships: Foreign ownership, transparency, and portfolio selection. Journal of Banking and Finance, 42(1), 232–246. https://doi.org/10.1016/j.jbankfin.2013.11.026
Stiroh, K. (2004). Diversification in Banking: Is Noninterest Income the Answer?. Journal of Money, Credit and Banking, 36(5), 853-882. http://www.jstor.org/stable/3839138
Võ Xuân Vinh và Trần Thị Phương Mai (2015). Lợi nhuận và rủi ro từ đa dạng hóa thu nhập của ngân hàng thương mại Việt Nam. Tạp chí Phát triển kinh tế, 26(8), 54-70.
Wooldridge, J. M. (2003). Cluster-sample methods in applied econometrics. American Economic Review, 93(2), 133-138.