Macroeconomics and Banks: Specific Determinants of Vietnamese Commercial Banks’ Profitability from 2014 to 2018

This chapter aims at determining factors that affect the profitability of commercial banks in Vietnam when an additional indicator, i.e., net interest margin (NIM), is added to the research model besides return on equity (ROE) and return on asset (ROA). The yearly data of GDP growth rate, inflation rate, cost to income ratio, non-interest income over total operating income ratio, loan to total assets ratio, equity to total assets ratio, customer deposits to total assets ratio, loan loss provisions over total loans ratio, operating income over total assets, and total assets from 2014 to 2018 of 24 Vietnamese commercial banks were employed in this research. Under the generalized least square regression method, the empirical results show that when the bank profitability is measured by NIM, non-interest income over total operating income ratio has a negative effect on bank profitability while the ratios of customer deposits to total assets, loan loss provisions over total loans, and operating income over total assets have positive effects on bank profitability, and these effects are statistically significant. The cost to income ratio, total assets, equity to total assets, and GDP growth rate also have negative impacts on bank profitability. Meanwhile, the rate of the loan outstanding to total assets and inflation rate show positive influences on bank profitability, and these effects are statistically insignificant. Implications and suggestions for further studies are provided at the end.