Factors determining net interest margins of the commercial banks in Vietnam

Abstract

This study investigates the factors determining the net interest margins of 33 Vietnamese commercial banks during the period 2008-2011. Based on the literature reviews, market power, managerial risk aversion, interest rate risk, credit risk, management quality and implied payment are the independent variables in the model. Fixed effects model will be chosen to run regression of panel data. The empirical analysis points out that managerial risk aversion, credit risk, management quality and implied payment are statistically significant in explaining bank’s net interest margins. Among four significant variables said above, only management quality has negative relationship with net interest margins. Additional, there is no evidence to conclude that both market power and interest rate risk are significant to net interest margins.

Keywords: net interest margins, Vietnamese commercial banks.