The trade off between interest income and non-interest income of Vietnam commercial banks

Abstract

This study contributes to the literature by investigating the trade-offs between interest- and non-interest income in Vietnamese commercial banks in the period 2006-2015. Using Vi and RAPi, we find that although risks to shareholders reduce when banks diversification to non-interest income activities, returns from these non-traditional activities are riskier than returns from traditional activities. Notably, when banks diversify their activities, return per unit of risk increase; but the more invests in fee-based income activities, the less benefit derive from diversification because return per unit of risk will reduce. These findings have significant contributions to the practice in banking activities