Phan Dinh Nguyen
A icle
De e minan s o bank p o i abili y in Vie nam: A ocus on
inancial and COVID-19 c ises
Jou nal o Business Economics and Managemen (JBEM)
P o ided in Coope a ion wi h:
Vilnius Gediminas Technical Uni e si y (VILNIUS TECH)
Sugges ed Ci a ion: Phan Dinh Nguyen (2024) : De e minan s o bank p o i abili y in Vie nam: A ocus
on inancial and COVID-19 c ises, Jou nal o Business Economics and Managemen (JBEM), ISSN
2029-4433, Vilnius Gediminas Technical Uni e si y, Vilnius, Vol. 25, Iss. 4, pp. 709-730,
h ps://doi.o g/10.3846/jbem.2024.22070
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Volume 25
Issue 4
Pages 709–730
h ps://doi.o g/10.3846/jbem.2024.22070
DETERMINANTS OF BANK PROFITABILITY IN VIETNAM:
A FOCUS ON FINANCIAL AND COVID-19 CRISES
Phan Dinh NGUYEN
Facul y o Finance and T ade, HUTECH Uni e si y, Ho Chi Minh Ci y, Vie nam
A icle His o y: Abs ac . This esea ch examines he de e minan s o banks’ p o i by employing
he GLS, GMM and SEM eg ession me hod o 574 obse a ions ob aining om
35 banks unc ioning in Vie nam be ween 2005 and 2022. Ou e idence indica es
ha non-pe o ming loans, deposi , loan, capi al, ope a ing cos , p o isions,
bank size, Co id-19 pandemic, in la ion, economic g ow h, deposi a e, c edi
isk, exchange a e and owne ship a e key ac o s a ec ing bank p o i abili y.
Ou indings show ha he global c ises a e nega i ely associa ed wi h ROA and
NIM while hey a e nega i ely ela ed o ROE. The COVID-19 has a s onge
e ec han he inancial c isis. Bo h c ises play a mode a ing ole in bank p o -
i abili y. This esea ch expands he exis ing li e a u e by analyzing he impac o
c ises and he mode a ing e ec s, c isis compa ison, and owne ship e ec which
ha e no been done so a , o ou bes knowledge. This esea ch also ex ends
he li e a u e by o e ing addi ional unde s andings abou he de e minan s o
bank p o i abili y in eme ging economies. Di e en om he p e ious s udies,
ou da ase including o eign banks helps us analyze all banks. The in es iga ion
o ac o s a ec ing p o i abili y also assis s banks in egula ing and suppo ing
p uden ial supe isions ca e ully.
■ ecei ed 18 Decembe 2023
■ accep ed 15 July 2024
Keywo ds: inancial c isis, COVID-19 pandemic, global c isis, de e minan s, bank p o i , Vie nam.
JEL Classi ica ion: G00, G01, G20, G21.
Co esponding au ho . E-mails: [email p o ec ed]; [email p o ec ed]
JOURNAL o BUSINESS
ECONOMICS & MANAGEMENT
1. In oduc ion
P e ious s udies ha e paid much a en ion o he de e minan s o bank p o i abili y in he
ecen decades. A la ge numbe o esea ch like Ga cia and Gue ei o (2016), Die ich and
Wanzen ied (2014) indica e ha bank p o i abili y exe s a i al ole in s eadiness and com-
pe i i eness o he banking sys em. Bank ailu e and collapse a ise om he low p o i abili y
(Bola inwa e al., 2019). The e o e, an analysis o bank p o i abili y is e y impo an o he
banking sys em’s s abili y and de elopmen .
P e ious s udies posi ha bank p o i is in luenced by many in luences a mic o
and mac o le el. Fo mic o le el, Naceu and Om an (2011) p esen ha bank p o i is
in luenced by bank magni ude by enjoying economies o scale meanwhile Ba en and Vo
(2019) show ha e y big banks can ace diseconomies o scale and hus li le sa ing
cos , leading o lowe p o i abili y. O he ac o s a ec ing bank p o i abili y a e liquidi y
and c edi isk (Mille & Noulas, 1997), non-in e es income (Nguyen, 2012), loan loss
710 P. D. Nguyen. De e minan s o bank p o i abili y in Vie nam: a ocus on inancial and COVID-19 c ises
p o isions (Bou a ie & Lepe i , 2008), non-pe o ming loans (Nguyen, 2024a). Fo mac o
le el, esea che s poin ou ha in la ion (Ba en & Vo, 2019), in e es a e (Le ine, 1996),
exchange a e (Nguyen, 2024b), and GDP g ow h (Bekhe e al., 2021) a e key de e mi-
nan s o bank p o i abili y.
Many s udies indica e ha he in e na ional inancial c isis be ween 2007 and 2009 is he
wo s inancial c isis in he wo ld since he G ea Dep ession (And ies & U su, 2016) bu
he wo s e ec on all sec o s o he economies a ound he wo ld since Wo ld Wa II is he
COVID-19 epidemic (In e na ional Mone a y Fund [IMF], 2020). The inancial c isis o ced
many banks and inancial ins i u ions o collapse and many o ganiza ions such as banks
ha e been closed and incu ed big losses by he COVID-19 epidemic. The global c ises
ha e impac ed s ongly he bank p o i abili y and he business cycle is co ela ed wi h
bank p o i s (Bol e al., 2012) while he COVID-19 epidemic has a ec ed en i e pa s o
indi iduals (Mulyaman & Julian o, 2021; Nguyen, 2024c). Bouzga ou e al. (2017) high-
ligh ha he ela ionship be ween he inancial c isis and bank p o i abili y is posi i e
o local banks and nega i e o o eign banks. The inancial sys em and inancial s abili y
a e s ongly a ec ed by he inancial c isis. Bank p o i is a ec ed by he inancial c isis
(Almoni i e al., 2021) and bank c edi isk has climbed du ing he COVID-19 epidemic
(Ma cu, 2021). Mos s udies indica e he nega i e e ec on he COVID-19 pandemic while
Nguyen (2024a) shows a posi i e co ela ion be ween he pandemic and bank e ec i e-
ness. Regula o s ha e gi en many measu es o assu e he inancial s abili y and dec ease
he isks o he banking sys em bu he knowledge abou he e ec s o c ises on bank
p o i is so impo an and hus equi ing a ca e ul examina ion o bank p o i abili y.
This esea ch has ou main con ibu ions. Fi s ly, in spi e o he signi icance o global
c ises o policymake s and esea che s, he e a e only a limi ed numbe o s udies ha
disco e he impac o inancial c ises o he COVID-19 epidemic on bank p o i . As a as
we know, no exis ing s udies ha e in es iga ed he combined e ec o bo h he inancial
c isis and he epidemic on bank p o i . The in luence o he inancial c isis on banks in
Vie nam has been paid li le a en ion. Ou s udy is one o he ea lies s udies o analyze
he de e minan s o bank p o i while conside ing he e ec s o c ises. The e o e, ou
p ima y con ibu ion o he exis ing li e a u e is p o iding an empi ical in es iga ion em-
ploying Vie namese da a om he inancial c isis and he COVID-19 epidemic. We o e
addi ional unde s andings in o he ac o s a ec ing bank p o i in eme ging ma ke s. The
bank panel da a se o 35 banks be ween 2005 and 2022 is hen employed. Secondly,
he simul aneous impac o he c ises on bank p o i abili y and i s de e minan s ha e no
been examined. The mode a ing ole o he c ises on bank p o i ha e been igno ed in
he exis ing li e a u e. The e o e, we analyze he simul aneous impac and mode a ing
e ec by using he SEM. Thi dly, we compa e he e ec s o he COVID-19 and inancial
c isis on bank p o i abili y. Finally, we analyze ac o s a ec ing and e alua e he in luence
o he COVID-19 and inancial c isis on bank p o i abili y. Ou da ase includes o eign
banks which ha e no been done so a . The p e ious esea ch has ocused only on do-
mes ic banks when analyzing he de e minan s while we analyze all. The in es iga ion o
ac o s in luencing bank p o i abili y assis s banks in egula ing and suppo ing p ac ical
supe isions wisely.
The es o his esea ch is s uc u ed as ollows. Sec ion 2 illus a es he li e a u e
e iew. Sec ion 3 shows he da a and esea ch me hodology. Empi ical e idence, he e-
sea ch esul s and discussion, is in es iga ed in Sec ion 4. Sec ion 5 p esen s conclusion
and implica ions.
Jou nal o Business Economics and Managemen , 2024, 25(4), 709–730 711
2. Li e a u e e iew
Theo e ically, esea che s poin ou ha he e iciency s uc u e heo y, signaling heo y, and
isk- e u n hypo hesis a e widely used heo ies o in es iga e ac o s a ec ing bank p o i .
The e iciency s uc u e heo y p oposed by Demse z (1973) s a es ha bank can ge big-
ge p o i s when hey ope a e mo e e icien ly. The eason o explain o his is ha bigge
banks migh ha e smalle expenses hanks o economies o scale. Bank wi h highe p o i s
can ob ain bigge ma ke sha e, leading o be e e iciency and consequen ly bigge p o i s
(Smi lock, 1985). Banks ob ain income, dec easing ope a ing cos s and hus be e income
i hey ope a e mo e e icien ly han hei compe i o s (Onuonga, 2014). Obamuyi (2013)
indica es ha bank p o i abili y can be a ec ed by in e nal e iciencies.
The signaling heo y indica es ha banks can imp o e hei p o i s by disclosing hei
ou s anding pe o mance and posi i e images. This heo y also classi ies he associa ion be-
ween capi al s uc u e and bank p o i . An inc ease in capi al p omo es u u e expec ancy
(T ujillo-Ponce, 2012). A lowe le e age a io could lead o he ac ha banks un be e han
hei compe i o s.
The isk- e u n heo y shows ha capi al and p o i abili y a e nega i ely connec ed (Om-
me en, 2011). Omme en (2011) poin s ou ha highe isk a ising om high e u n is due o
small equi y p opo ions and la ge le e age le els. In addi ion, inancial c isis and COVID-19
pandemic b ing shocks in inancial ma ke , which banks can be in dange o a high liquidi y
isk. The business shu downs, mo emen limi a ions, and educed demand o goods and
se ices du ing hese pe iods migh encou age de aul paymen and massi e wi hd awals o
money om banks (Goodell, 2020). The dec ease in deposi a ising om low consump ion
end can inc ease inancing cos and hus lowe ing bank p o i abili y (Elnahass e al., 2021).
Empi ically, mos esea che s ha e analyzed ac o s a ec ing bank p o i abili y o a speci -
ic na ion and hei s udies ha e paid li le a en ion o all egions o making an in e na ional
compa ison among a big quan i y o na ions (Lamo he e al., 2024). Feng and Wang (2018),
Le and Ngo (2020), Ca e ini e al. (2021), Kozak (2021), Ҫolak and Öz ekin (2021), Le e al.
(2022), Ho e al. (2023), and Lamo he e al. (2024) a e ypical examples o ac oss banking
sec o s udies a ound he wo ld. Feng and Wang (2018) in es iga e he case o Eu ope and
Ame ica. They indica e ha Eu opean banking sys em has a lowe p o i abili y han Ame i-
can banking sys em since he banking sys em in Eu ope has a bigge unding expenses. Le
and Ngo (2020) examine he in luences impac ing bank p o i in 23 na ions o e he pe iod
2002–2016 o conclude ha capi al ma ke de elopmen posi i ely a ec s bank p o i . Ca-
e ini e al. (2021) in es iga e he isk and e u n o banks o compa e he di e se models
o e e y Eu opean banking sys em. They show ha he banks wi h he bes isk p o ile ha e
p o i s. Kozak (2021) in es iga es bank p o i abili y o Cen al, Eas e n and Sou h Eu ope o
indica e ha bank isks nega i ely in luence bank p o i abili y. Lamo he e al. (2024) employ
he da ase o 2,091 comme cial banks unc ioning in 110 na ions wo ldwide o conclude ha
bo h inside and ou side in luences impac bank p o i . The inside elemen s a e lis ed uni s,
non-pe o ming loans, e ec i eness, p o i , and ma ke capi aliza ion. The ou side causes
a e p ice changes, joblessness, in e es a es, economic luc ua ions, and he si ua ion o he
na ions in he asse s anding. Mi o ić e al. (2024) examine he case o Eu o zone coun ies o
p esen ha non-pe o ming loans and expense o income a e nega i ely associa ed while ne
in e es income, p o i a ising om exchanging p ope ies, ne ee and commission income
a e posi i ely co ela ed wi h bank p o i abili y. In addi ion, se e al esea che s also examine
he e ec o COVID-19 epidemic on he banking sec o wo ldwide. Ҫolak and Öz ekin (2021)
712 P. D. Nguyen. De e minan s o bank p o i abili y in Vie nam: a ocus on inancial and COVID-19 c ises
examine he e ec o COVID-19 on loan g ow h in 125 coun ies o poin ou ha banks
wi h de eloped and obus inancial sys em can main ain hei loan g ow h. Le e al. (2022)
in es iga e he in luence o COVID-19 on bank p o i by employing he da ase o 24 Islamic
na ions be ween 2013 and 2020 o conclude ha sec o al di e si ica ion a ec s posi i ely
bank p o i abili y and his di e si ica ion could dec ease he opposing in luence o COVID-19
on bank p o i abili y. Ho e al. (2023) also examine he in luence o COVID-19 on bank p o i -
abili y o 1,231 banks in 90 coun ies o conclude ha e enue di e si ica ion could dec ease
he COVID-19 ad e se in luence.
Fo speci ic coun y s udies, many esea che s indica e ha bank p o i abili y has been
de e mined by bo h inside and ou side in luences. Fo inside in luences, bank size is used
by mos esea che s o in es iga e he in luence o bank size on bank p o i . Bank size has
bo h posi i e and nega i e e ec on bank p o i . E idence om Akha ein e al. (1997) and
Smi lock (1985) shows ha bank dimension is a posi i e ela ion wi h bank p o i . Bank p o i
and bank size a e closely linked (Demi güç-Kun & Maksimo ic, 1998). Bigge banks can ge
highe ne in e es ma gins (We e & Wambua, 2014). Bank size can imp o e bank p o i abil-
i y by enjoying economies o scale (Alam e al., 2019). In con as , e y la ge banks can ace
diseconomies o scale and hus an inc ease in bank size will lead o li le cos sa ing (Be ge
e al., 1987). Banks can ge lowe p o i when hey become bigge due o lowe quali y o
managemen (Ba en & Vo, 2019) o lowe p o i abili y i bank s abili y can keep lowe ea n-
ings luc ua ions (Nyola e al., 2021). La ge banks may wan o p omo e hei b and name
h ough a highe geog aphic di e si ica ion, and his di e si ica ion can be associa ed wi h
lowe alua ion, and hence lowe p o i abili y. Howe e , banks migh ge highe p o i when
hey expand geog aphic complexi y wi h lowe de aul isk, highe luc ua ions in ea nings
(Nyola e al., 2021).
Bank isk managemen is so impo an since low p ope y quali y and low liquidi y posi-
ions a e wo o mos de e mined sou ces o bank ailu es. Bank p o i abili y plays a nega i e
ole in liquidi y and c edi isk (Mille & Noulas, 1997). This is because banks p o iding high
isk loans can ge mo e unpaid loans, and hence lowe e u ns. Bank expenses also in luence
bank p o i abili y. The quali y o bank managemen can imp o e bank p o i s and hus a
be e managemen quali y migh enhance bank p o i s (Molyneux & Tho n on, 1992). Many
o he esea che s indica e ha bank p o i s can be a ec ed by many ac o s such as non-in-
e es income (Nguyen 2012), c edi loss p o isions (Bou a ie & Lepe i , 2008), non-pe o m-
ing loans (Nguyen, 2024a). Ba en and Vo (2019) e idence ha bank isk measu ed by he
c edi isk p o isions di ided by o al loans a ec s bank p o i abili y. Bank p o i abili y can
be imp o ed by an inc ease in c edi gua an ee since he gua an ee can decline he expec -
ed loss om non-pe o ming loans and ise in p o i om lending (Liang e al., 2017). Loan
assu ance and capi al adequacy can imp o e issues o ad e se selec ion and mo al haza d,
and hence quali y o bank asse leading o ope a ion e iciency (Liang e al., 2017). Howe e ,
an inc ease in bank liquidi y p opo ion is nega i ely connec ed o ne in e es ma gin (We e
& Wambua, 2014).
Recen esea ch p esen s ha bank p o i is impac ed by many ac o s. Gazi e al. (2022)
analyze lis ed banks’ p o i in Bangladesh o show ha non-pe o ming loans, liquid p ope -
ies, big olumes o co e capi al, bank dimension a ec bank e iciency. Yuan e al. (2022)
in es iga e he case o Bangladesh and India be ween 2020 and 2021 o conclude ha bank
dimension and le e age play a di ec ole in bank p o i abili y. Belcaid and Al-Fa yan (2023)
employ he case o Mo occo lis ed banks o con i m ha concen a ion and o eign owne ship
ha e an ad e se in luence on bank e iciency while domes ic owne ship has an encou aging
Jou nal o Business Economics and Managemen , 2024, 25(4), 709–730 713
e ec . Qehaja-Keka e al. (2023) analyze he case o Koso o and Albania o conclude ha
o al loans and in e es a e a e posi i ely ela ed each o he while non-pe o ming loans
and bank e iciency a e ad e sely associa ed. Mashamba and Chiku uma (2023) analyze he
case o Zimbabwe o indica e ha non-in e es e enue, bank liquidi y, expense e ec i eness,
capi al app op ia eness, and bank s eadiness a e posi i ely associa ed while indus y ac o
and bank concen a ion a e ad e sely connec ed o bank p o i s. Gazi e al. (2024) e idence
ha p ope y con olling quali y, liquidi y and loan isk a e posi i ely ela ed while capi al
app op ia eness, unc ioning e ec i eness and bank magni ude a e ad e sely associa ed wi h
bank e iciency.
Fo ex e nal causes, we can see ha mac o ac o s like p ice change, in e es a es, and
ou pu g ow h, migh ha e an in luence on bank p o i s. In e es a es play an impo an ole
in bank p o i s since banks bo ow money o lend o ge he ma gin be ween he deposi a e
and he loan a e. In e es a e luc ua ions can sho en he in e es sp ead be ween asse s
and liabili ies, he ne sa ings e u n and g oss in es men e u n (Le ine, 1996). This sp ead
can mi o he bank in e es ma gin. In e es a es can be a sou ce o in la ion and de aul isk
o loans (Madu a & Za uk, 1995) because in e es a es can a ec money supply and cos o
he banking sec o . In e es a e is conside ed as an essen ial mac oeconomic de e minan s
o bank p o i (Hanson & Racha, 1986). An adjus men in in e es a es a ec s bank p o i s
(Ogunleye, 2001). This is because an inc ease in in e es a es help banks ge mo e income
om hei new asse s (Demi güç-Kun & Huizinga, 1999). Gazi e al. (2024) poin ou ha
bo h p ice change and in e es a e sp ead play a posi i e ole in bank p o i s. In con as ,
Naceu (2003) indica es ha in e es a es ha e an ad e se in luence on bank e ec i eness
while Beckmann (2007), Yap and Kade (2008) show he ambiguous associa ion be ween in-
e es a es and bank p o i . In addi ion, mos esea che s poin ou ha p ice change, GDP
and cen al bank in e es a es a e he main de e minan s o bank e ec i eness (Bol e al.,
2012). O he economis s show ha bank p o i abili y can be impac ed by he business cycle,
sho - e m in e es a es, an icipa ed p ice changes, and exchange a es (Bekhe e al., 2021).
Mi o ić e al. (2024) e idence ha GDP has a posi i e in luence while in la ion, unemploymen
a e and g oss go e nmen deb a e nega i ely associa ed wi h bank p o i abili y. Howe e ,
Mashamba and Chiku uma (2023) poin ou ha he connec ion be ween GDP, in la ion and
bank pe o mance does no exis .
P e ious s udies indica e ha bank p o i is a ec ed by c ises like inancial c isis and
disease c isis (Almoni i e al., 2021). The inancial c isis has an ad e se e ec on comme cial
banks’ p o i e iciencies and cos s in Eu ope (And ies & U su, 2016). Bank ailu es migh es-
cala e du ing pandemics, as seen du ing he global inancial c isis in he Uni ed S a es (Seelye
& Ziegle , 2020). Bank go losses be ween 2006 and 2009 (Yip & Bocken, 2018) and bank
c edi isk has inc eased h oughou he COVID-19 epidemic (Ma cu, 2021). Howe e , he
in luence o he c ises on bank p o i abili y ha e been ela i ely small in he s ic ly con olled
inancial sys em like Islamic coun ies (E ani & Vasigh, 2018). The e idence shows ha banks
in Sweden pe o med well in he wo ldwide inancial c isis in he pe iod 2006–2009 (Lindblom
e al., 2010). The COVID-19 pandemic has a negligible in luence on Saudi A abia’s inancial
sys em (Almoni i e al., 2021). Mos o comme cial banks in Indonesia ha e pe o med well
while a ew banks ha e incu ed losses du ing he COVID-19 pandemic (Rahmi & Sumi a ,
2021). Gazi e al. (2022) e eal ha du ing he COVID-19 pe iod, non-pe o ming loans, liq-
uid p ope ies, la ge olumes o co e capi al, and i ele an dimensions led o a decline in
bank pe o mance. Nguyen (2024b) e idence ha he COVID-19 is signi ican ly connec ed o
bank pe o mance. In addi ion, he COVID-19 has an ad e se in luence on bank pe o mance
714 P. D. Nguyen. De e minan s o bank p o i abili y in Vie nam: a ocus on inancial and COVID-19 c ises
h ough highe non-pe o ming loans (Kozak, 2021). Fu he mo e, he in e na ional c ises c e-
a e an en i onmen al u bulence. This en i onmen al u bulence could mode a e he ela ion-
ship bank pe o mance (Zambon e al., 2021). Nguyen (2024d) e idences ha he COVID-19
has he mode a ing e ec ia bank size, owne ship, non-pe o ming loans, and bank equi y.
3. Da a and esea ch me hodology
3.1. Da a
Ou esea ch sample o 35 banks ope a ing in Vie nam accoun s o 74.47% o he bank pop-
ula ion in Vie nam because he banking sys em cu en ly has 47 banks ope a ing in Vie nam.
The sample size ep esen s well he Vie namese banking sys em. This is because, among he
4 s a e- ully owned banks, Ag ibank and OCB a e wo s a e-owned banks. Ou o 31 join
s ock banks, 29 banks a e collec ed in ou esea ch sample. 4 ou o 9 o eign banks, which
ha e da a a ailable and ope a ing a long pe iod in Vie nam a e collec ed.
Ou da a se is a comp ehensi e da a se since we collec ed mo e han 74.47 pe cen
o he comme cial banks unc ioning in Vie nam o a long pe iod. We collec ed 574 obse -
a ions om he inancial epo s o 35 Vie namese comme cial banks be ween 2005 and
2022. We collec he mac o da a om he websi es o he S a e Bank o Vie nam and Gene al
S a is ics O ice o Vie nam.
3.2. Me hodology
Based on models o p e ious esea ch like Ba en and Vo (2019), and we add h ee a iables,
owne ship, CRISIS and PAN in o he model, e lec ing he in luence o he inancial c isis and
he COVID-19 epidemic, he ollowing model o eg ession is p oposed o in es iga e he
de e minan s o he banks’ p o i abili y in Vie nam.
Yi = β0 + β1NPLi + β2SIZEi + β3CRi + β4OCIi + β5DEPi + β6LOANi + β7RISKi +
β8CRISISi + β9PANi + β10INFi + β11GDPi + β12RIRi + β13EXRATEi + β14OWNi +
β15FORi + ei ; (1)
Xi = β0 + β1CRISISi + β2PANi + ei , (2)
whe e Yi a e dependen a iable, ROAi , ROEi and NIMi measu ing he p o i abili y o banks.
ROAi is he e u n on asse , he a io be ween ne income and o al asse . ROEi ep esen s
he e u n on equi y, which is he a io o ne income o o al equi y. NIMi , ne in e es ma -
gin, is measu ed as he di e ence be ween in e es ea ned and in e es paid, di ided by he
a e age o al asse s. Xi is bank cha ac e is ic a iables, including NPLi , SIZEi , CRi , OCIi , DEPi ,
LOANi and RISKi . The e a e ele en independen a iables. NPLi , non-pe o ming loans, is cal-
cula ed by di iding he amoun o non-pe o ming loans by he o al loans. SIZEi ep esen s
he size o he bank, measu ed by he loga i hm o i s o al asse s. CRi is he capi al indica o ,
measu ed as he a io o equi y o o al asse s. OCIi is he a io o ope a ing cos s o income.
DEPi ep esen s he a io o cus ome s’ deposi s o o al asse s. LOANi is he indica o meas-
u ed by o al loans di ided by o al asse s. RISKi is he p opo ion o c edi isk p o isions o
o al loans. CRISIS deno es he inancial c isis du ing he pe iod 2008–2009, assigned a alue
o 1 o his ime ame and 0 o he wise. PANi is he COVID-19 epidemic, assigned a alue o
1 o he 2020–2021 epidemic and 0 o he wise. CRi is he capi al p opo ion, measu ed by
equi y di ided by o al asse s. INFi is he yea ly change in CPI and GDPi is he yea ly a e
Jou nal o Business Economics and Managemen , 2024, 25(4), 709–730 715
o GDP. RIRi is he yea ly ac ual deposi a e. EXRATEi ep esen s he na u al loga i hm o
he exchange a e. OWNi is he owne ship which assigns alue o 1 o banks wi h go e n-
men -owned sha es and 0 o o he wise. FORi is he o eign owne ship which assigns alue
o 1 o banks wi h o eign-owned sha es and 0 o o he wise. ei is he e o e m.
The s anda d eg ession echniques o panel da a, gene alized leas squa e, he di e -
ence GMM and he SEM a e employed o un he eg ession model. The GLS eg essions a e
employed o sol e he p oblem o mul icollinea i y and he e oscedas ici y i any. Fu he -
mo e, he p oblem o endogenei y may occu , hence he dynamic model is also employed
o supply obus esul s. The GMM echnique de eloped by A ellano and Bond (1991) is used
o es ima e he eg essions. The usage o he sys em GMM can inc ease e iciency bu his
es ima ion me hod needs mo e ins umen s han he di e ence GMM and hus his me hod
migh no be app op ia e o employ wi h a da ase wi h small numbe o g oups. The e o e,
he di e ence GMM is app op ia ely used o es ima e ou model (A ellano & Bond, 1991)
since ou i s -di e enced ins umen s a e no co ela ed wi h he unobse ed g oup e ec s
and we include in he le els equa ion only hose a iables, which a e no co ela ed wi h he
ixed e ec s. We also employ he SEM o analyze he in e ac ion be ween c ises and bank
cha ac e is ic a iables, and he mode a ing ole o c ises on bank p o i abili y.
4. Resea ch esul s and discussion
4.1. Desc ip i e analysis
Figu es 1 and 2 show ha he e is a luc ua ion in bank p o i abili y be ween 2005 and 2022
in he Vie namese banking sec o . ROA inc eased om 1.5% in 2005 o 2.6% in 2009 due o
a dec ease in ope a ing cos s as shown in Figu e 2 while NIM educed om 3.2% in 2005 and
hen emained ela i ely cons an a 2.9% ill 2009 due o cons an lending and bo owing
ac i i ies. Financial c isis occu ed in he pe iod 2008–2009 bu he go e nmen suppo ed
banks and hence inc easing in hei p o i . ROA educed o 1.6% in 2013 while NIM inc eased
o 3.7% in 2012 because he go e nmen s opped suppo ing, banks inc eased hei lending
a es and in la ion was high. The lowes le el o ROA and ROE be ween 2012 and 2016 was
a ibu ed o banking sys em ins abili y and de e io a ing economic condi ions. High NPLs
also wo sened ROA and ROE (Nguyen, 2024a). ROA inc eased om 1.1% in 2016 o 2.1% in
2021 because in la ion educed and economic g ow h was good bu NIM emained ela i ely
unchanged. This pe iod shows ha ROE sha ply aised om 5.4% in 2015 o 15% in 2022.
This e lec s he ac ha managemen ’s success in c ea ing income om he Vie nam banks’
Figu e 1. Bank p o i abili y, liquidi y and isk
716 P. D. Nguyen. De e minan s o bank p o i abili y in Vie nam: a ocus on inancial and COVID-19 c ises
in es men and huge inc ease in ne sales (Nguyen, 2024a). The decline in NIM and ROE om
2019 o 2021 was a ibu ed o educed di idends paid by banks and di ec i es om he S a e
Bank o Vie nam o lowe lending a es amid he COVID-19 pandemic.
Bank equi y ac ion dec eased apidly om 16.5% in 2008 o 9.2% in 2011, inc eased
o 12% in 2012, educed o 7.7% in 2020, and hen inc eased o 9.1% in 2022. The pe iod
2005–2011 o ced banks o enhance hei asse s because hey p epa ed o se ious compe i-
ion wi h o eign banks’ en y. This is because Vie nam joined WTO in 2007 and Vie namese
banking ma ke was opened o o eign banks in 2011. This p essu e o ced banks o inc ease
hei capi al and equi y in 2012. Banks go used o wi h compe i ion and hen main ained
easonable equi y compa ed o asse . In con as , non-pe o ming loans and isk p o isions
ha e no much luc ua ed o e he pe iod 2005–2022. NPLs we e highe be ween 2011 and
2013 due o he pos poned impac o 2008–2009 inancial c isis and NPLs ha e inc eased
since 2021 because o he COVID-19 e ec (Nguyen, 2024b). Bank cos , c edi and und
mobiliza ion educed o 2011 due o dec easing economic g ow h le el and high p ice luc-
ua ion. The economy and in la ion ha e been imp o ed since 2012, hence loan and deposi
ha e been also imp o ed. Banks mobilized unds o hei lending and in es men s o e he
pe iod 2012–2022.
Table 1 illus a es he a e age, s anda d de ia ion, maximum and minimum alues. The
maximum alue o he ROA is 38.27%, TPBank in 2021 esul ing om i s posi i e digi al
change, and he minimum alue o ROA is –9.45%, TPBank in 2011 because o a hough ul
co up ion which Gene al Di ec o was de ained. The a e age alue o ROA is 1.74% and he
s anda d e o is 3.84%. The mean ROE s ands a 9.72%, accompanied by a s anda d de ia-
ion o 7.15%. The minimum alue o ROE is –5.36%, Saigon Comme cial Bank in 2006, and
he maximum alue o ROE is 29.79%, Asia Comme cial Bank in 2006. NIM’s minimum alue
is 0.64%, TPBank in 2011 and i s maximum alue is 15.44%, Eximbank in 2007. The a e age
NIM s ands a 2.83%, wi h a co esponding s anda d de ia ion o 1.41%. This highligh s he
p o i a iabili y among banks in he Vie namese banking sec o , unde sco ing i s high com-
pe i i eness and a ying le els o inancial e iciency. The e ha e been a ew banks wi h loss.
Saigon Comme cial Bank epo ed i s losses o 2006, 2007, TPBank s a ed i s loss in 2011
and SGbank p esen ed i s loss in 2021 because o co up ion p oblem and a ise in bank
expenses, he es o banks ha e enjoyed hei posi i e p o i s e ealing he s ong ma ke
powe o comme cial banks in Vie nam.
In con as o o eign banks ope a ing in Vie nam and globally, Vie namese banks ypically
ha e smalle sizes and asse s. Fo ins ance, Ag ibank, he la ges domes ic bank in Vie nam,
Figu e 2. Bank cos , deposi , loan and mac o indica o s
Jou nal o Business Economics and Managemen , 2024, 25(4), 709–730 723
posi i ely co ela ed wi h comme cial banks’ p o i s in e ms o e u n on equi y. In e es ingly,
we ind ha he COVID-19 endemic shows a posi i e in luence on e u n on equi y. This e-
lec s he ac ha comme cial banks in Vie nam un hei business e y well du ing he c ises
(T ang, 2021). Banks ha e used di idends, which should be paid o sha eholde s, o ob ain
mo e ese es o c ises o many yea s (Nguyen, 2024a). The indings also indica e ha he
inancial c isis and he epidemic p esen an indi ec impac on bank p o i h ough bank size.
The esul s in Table 5 show ha he inancial and COVID-19 c ises play a mode a ing in-
luence on bank p o i abili y h ough bank size, non-pe o ming loans, capi al a io, ope a ing
cos , deposi , loan, and loan-loss p o isions. The inancial c isis discou ages bank size while
he COVID-19 pandemic encou ages i and in u n bank size enhances bank p o i . Bo h c i-
ses educe non-pe o ming loans and consequen ly imp o e bank e u n. The inancial c isis
o ces bank leade s o inc ease hei capi al o imp o e hei p o i meanwhile he pandemic
shows he opposi e. The pandemic educes he cos s o imp o e bank p o i . Banks ake
less deposi s du ing he inancial c isis bu hey ecei e mo e deposi s du ing he pandemic.
Banks p o ide mo e loans and loan-loss p o isions leading o be e bank p o i du ing he
pandemic while he inancial c isis has no e ec .
Table 5. SEM esul s
Rela ionships ROA ROE NIM
CRISIS SIZE –1.0105***
(0.000)
–1.0105***
(0.000)
–1.0105***
(0.000)
PAN SIZE 0.7810**
(0.15)
0.7810**
(0.015)
0.7810**
(0.015)
CRISIS NPL –0.0041**
(0.011)
–0.0041**
(0.011)
–0.0041**
(0.011)
PAN NPL –0.0052***
(0.000)
–0.0052***
(0.000)
–0.0052***
(0.000)
CRISIS CR 0.0299**
(0.013)
0.0299**
(0.013)
0.0299**
(0.013)
PAN CR –0.0326***
(0.000)
–0.0326***
(0.000)
–0.0326***
(0.000)
CRISIS OCI –0.1406
(0.495)
–0.1406
(0.495)
–0.1406
(0.495)
PAN OCI –0.3563*
(0.083)
–0.3563*
(0.083)
–0.3563*
(0.083)
CRISIS DEP –0.0801***
(0.000)
–0.0801***
(0.000)
–0.0801***
(0.000)
PAN DEP 0.0741***
(0.005)
0.0741***
(0.005)
0.0741***
(0.005)
CRISIS LOAN –0.0100
(0.578)
–0.0100
(0.578)
–0.0100
(0.578)
PAN LOAN 0.0359**
(0.045)
0.0359**
(0.046)
0.0359**
(0.046)
CRISIS RISK –0.0047**
(0.024)
–0.0047**
(0.024)
–0.0047**
(0.024)
PAN RISK 0.0014
(0.628)
0.0014
(0.628)
0.0014
(0.628)
724 P. D. Nguyen. De e minan s o bank p o i abili y in Vie nam: a ocus on inancial and COVID-19 c ises
Rela ionships ROA ROE NIM
SIZE BANK
PROFITABILITY
0.0075***
(0.000)
–0.0084***
(0.000)
–0.0913***
(0.003)
NPL BANK
PROFITABILITY
–0.0836
(0.160)
–0.7763***
(0.000)
–0.0012***
(0.000)
CR BANK
PROFITABILITY
–0.0228
(0.101)
–0.0635**
(0.019)
0.0161**
(0.028)
OCI BANK
PROFITABILITY
–0.0019***
(0.000)
–0.0016***
(0.000)
–0.0004***
(0.000)
DEP BANK
PROFITABILITY
–0.0249*
(0.063)
–0.0179
(0.425)
–0.0029
(0.550)
LOAN BANK
PROFITABILITY
0.0200*
(0.065)
0.0028
(0.907)
0.0186***
(0.000)
RISK BANK
PROFITABILITY
0.0853***
(0.009)
–0.0179
(0.745)
0.0362**
(0.046)
CRISIS BANK
PROFITABILITY
0.0042
(0.394)
0.0299**
(0.011)
–0.0038
(0.115)
PAN BANK
PROFITABILITY
0.0011
(0.893)
0.0776***
(0.000)
–0.0108***
(0.001)
INF BANK
PROFITABILITY
0.1115
(0.152)
0.7702***
(0.000)
0.0947***
(0.000)
GDP BANK
PROFITABILITY
0.0662
(0.605)
1.6470***
(0.000)
–0.1422*
(0.062)
RIR BANK
PROFITABILITY
0.1861
(0.149)
1.1302***
(0.000)
0.0980**
(0.046)
EXRATE BANK
PROFITABILITY
–0.0345***
(0.006)
0.1054***
(0.008)
0.0090
(0.180)
OWN BANK
PROFITABILITY
–0.0123***
(0.000)
0.0328***
(0.000)
–0.0001
(0.911)
FOR BANK
PROFITABILITY
–0.0128***
(0.008)
0.0447***
(0.000)
–0.0019
(0.405)
No e: * signi ican a 0.10, ** signi ican a 0.05, *** signi ican a 0.01. P- alue is in b acke wi h obus s anda d e o .
Many economis s poin ou ha bank p o i s a e in luenced by he business cycle, sho -
un in e es a es and p ice change expec a ions (Ch onopoulos e al., 2015). O he esea ch-
e s such as Albe azzi and Gambaco a (2009) and Bol e al. (2012) conside in la ion, ou pu
g ow h and cen al bank in e es a es as he key ac o s a ec ing bank p o i . Ou indings
sugges ha in la ion, economic g ow h, exchange a e and deposi a e play a signi ican
ole in bank p o i in Vie nam (Minh & Canh, 2015) since coe icien s o hese a iables a e
posi i ely signi ican . This is because comme cial banks may pass he cos o in la ion o hei
cus ome s, and deposi a es and lending a es a e apidly adjus ed when in la ion changes
(Ba en & Vo, 2019; Nguyen, 2024b). Banks can enjoy bene i s om highe a e o in la ion
since Vie nam is s ill de eloping coun y and comme cial banks can shi hei de elopmen
owa ds e ail segmen s o ob ain hese bene i s (Hai e al., 2020). As economic en i onmen
becomes be e , comme cial banks can ge p o i s because hey o e highe in e es -bea ing
loans due o a high money demand and bo owe s ge highe p o i s and in u n pay back
End o Table 5
Jou nal o Business Economics and Managemen , 2024, 25(4), 709–730 725
in e es and loans as p omised. The es ima ed esul s also show ha an app ecia ion in Vi-
e namese Dong could ha m bank e iciency measu ed by e u n on equi y and ne in e es
ma gin while his app ecia ion could imp o e e u n on asse . Banks wi h he go e nmen
and o eign owne ship ha e lowe e u ns han p i a e owne ship banks.
5. Conclusions and implica ions
5.1. Conclusion
Examining he ac o s a ec ing bank p o i in Vie nam be ween he inancial c isis and he
Co id-19 pandemic is an in e es ing opic. We conside bank de ailed cha ac e is ics, sec o
speci ic and mac o elemen s as de e minan s o bank e iciency. In ou esea ch, we ind ha
p e ious e u ns, bank size, non-pe o ming loans, c edi isk, c ises, p ice change, change
in g oss domes ic p oduc , eal deposi a e, exchange a e and owne ship a e key ac o s
in luencing bank p o i in Vie nam. Bank size, in la ion, economic g ow h and eal deposi
a e a e posi i ely co ela ed wi h bank p o i abili y meanwhile non-pe o ming loan, inancial
c isis and Co id-19 pandemic ha e an ad e se co ela ion wi h bank p o i . Banks wi h go -
e nmen and o eign owne ship ha e lowe e u n on asse since hey can lend a lowe a e.
The inancial and COVID-19 c ises exe a mode a ing impac on bank p o i h ough bank
dimension, non-pe o ming loans, capi al, ope a ing cos s, deposi , loans and c edi p o i-
sions. The inancial c isis and he COVID-19 c isis a e nega i ely ela ed o bank p o i abili y.
Du ing he c ises banks ha e issued less sha es bu paid mo e di idends han o he pe iods.
5.2. Implica ions
Theo e ical implica ions: Ou con ibu ions o he exis ing li e a u e a e o examine he expe -
imen al explo a ion by u ilizing he Vie namese p oo o p esen addi ional unde s andings
in o wha de e mines bank e iciency in eme ging ma ke s be ween he inancial c isis and
he Co id-19 pandemic. The panel da ase o 35 banks om 2005 o 2022 is hen employed.
We also analyze he simul aneous impac and mode a ing ole o he c ises on bank p o -
i abili y. We hen compa e he e ec o inancial c isis and COVID-19 epidemic. Finally, we
analyze he ac o s in luencing and he alua ion o he e ec o he c ises on bank p o i .
The in es iga ion o causes in luencing bank p o i assis s banks in egula ing and suppo ing
p ac ical supe isions wisely.
P ac ical implica ions: Fo bank egula o s, non-pe o ming loans should be well egula ed
o keep he banking sys em mo e s able. They should moni o in la ion, economic g ow h,
in e es a es and exchange a es o inco po a e hem in he decision making p ocess. Fo
banke s, hey should expand hei size o enjoy economies o scale, exploi he oppo uni y
o inancial c isis, in la ion and economic g ow h o imp o e hei p o i . They should man-
age hei ope a ion cos , use deposi e ec i ely, and con ol he nega i e e ec s well du ing
he COVID-19 pandemic. The p ope y quali y should be measu ed in he amewo k ha
non-pe o ming loans a ising om inancing o he eal es a e ma ke du ing he COVID-19
pandemic. Fac o s, ope a ing cos , deposi a io, COVID-19, ha ing a nega i e in luence on
bank p o i abili y, should be c i ically analyzed by Vie namese banks o es uc u e hei s a -
egies o ob ain highe p o i s. They should ocus on cus ome loyal y and e iciency o he
comme cial app oach o imp o e hei p o i by o ien ing hei business model o hei cus-
ome . Risk managemen should be well done by ca ying ou co po a e go e nance model
726 P. D. Nguyen. De e minan s o bank p o i abili y in Vie nam: a ocus on inancial and COVID-19 c ises
and in e nal con ol sys em. Banke s should ha e lexible and sui able adjus men s o he
concen a ion o di e si ica ion o asse s in di e en s ages o manage bank p o i abili y
du ing he c ises. Di e si ied asse s and a policy o sanc ioning and managing loans should
be p o ided. Ope a ing cos s should be educed and only allow hese cos s inc ease sui ably
when e enue aises as e han he cos s. They should in es mo e in inance echnology,
digi al echnology, AI in banking ope a ions o inc ease hei e iciency. This is because he
echnology applica ions can help banks eco e and s eng hen inancial s abili y. These c i-
ses help bank boos e digi al p ocedu es o ansac ion and ope a ions. This applica ion can
help banks educe hei cos s, enhance hei se ices, sa is y hei cus ome s, and inc ease
hei p o i abili y. Banke s should ake ad an age o go e nmen suppo du ing he c ises
o main ain hei p o i abili y. Bank should inc ease cus ome com o and p o ec ion ia
digi al banking.
Vie nam’s banking indus y is small bu i exe s an essen ial ole in he wo ld banking
sys em. I assis s o eign banks in lea ning banking business models especially when hey
en e he Vie namese banking ma ke . I helps and collabo a es wi h o eign banks in business
ac i i ies such as in e na ional paymen and money ans e . Banking ac i i ies o Vie namese
banks a e simila o hose o o eign banks. The e o e, o eign banks ope a ing in Vie nam
o o he coun ies can lea n om Vie namese banks as p esen ed in p ac ical implica ions.
Limi a ions and u he s udy: Ou esea ch has ou aluable con ibu ions bu i s ill exis s
some limi a ions. Fi s , he causal ela ionship be ween bank p o i abili y and i s de e minan s
can help banke s p o ide ele an policies o enhance bank p o i abili y and s eng hen inan-
cial s abili y, bu we do no examine his causal ela ionship. Second, some o he ac o s like
sec o ial di e si ica ion and mone a y policies can explain he de e minan s and assis banke s
in imp o ing and keeping inancial s abili y bu hey ha e no been analyzed by ou esea ch.
The u he s udy should examine ca e ully he causal ela ion and adding mo e a iables in
he esea ch model. Finally, a quali a i e analysis allows us o p o ide a gene al pic u e and
a gumen s o ac o s d i ing bank p o i abili y bu we do no p o ide a desc ip i e analysis
on how inside and ou side causes in luencing bank e iciency. The u he esea ch should
p o ide a quali a i e analysis on how hese ac o s in luence bank p o i abili y.
Disclosu e s a emen
I do no ha e any compe ing inancial, p o essional, o pe sonal in e es s om o he pa ies.
Con lic s o in e es
The e is no con lic o in e es .
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