Determinants of bank profitability in Vietnam
Abstract
Banking system plays an important role in the development of the
economy of Vietnam. For banks, profitability is the most concerned factor; however,
since the financial crisis 2008, the performance of most of banks tends to decline and
be volatile. Therefore, this study necessarily conducted to examine the determinants
of bank profitability in Vietnam.
By incorporating with the researches in other countries about the empirical
evidences of determinants of bank profitability, this study applies the internal factors
(capitalization, operating efficiency, liquidity, loans, and bank size) and the external
factors (GDP and inflation) into the regression models examining the effects of these
factors. The fixed effects regression models are applied to analyze the balanced panel
data of 26 commercial banks in Vietnam over the period 2009-2013. The results show
that the capitalization, operating efficiency, liquidity, GDP, and inflation has a
significant relationship with the profit; meanwhile, the loans and bank size has
insignificant relationship.
Generally, this paper suggests that banks should have an effective
operation by reduce the operating cost to enhance the profits. In addition, the
managers should invest more in liquid assets and also forecast accurately the inflation
to make the profits.