Determinants of Bank profitability: The case of commercial Banks listed on the Vietnam’s stock exchange

Abstract

Using panel data collected from 9 Vietnamese commercial banks listed in the HNX and HOSE in period 2007-2013 data, this paper found out that: (1) profitability level of these banks is higher than minimum requirements of CAMELS, that is, when compared to the average levels of international standards - although some banks got low profitability in certain years; (2) the profitability of these banks are determined by several internal and external factors. The key significant internal factors are: bank size - the smaller banks have higher profit; total assets – a total assets growth rate – the higher the profit; interest rates – higher interest rate level bring better benefit to banks than deposit customers. To improve the bank profitability, management should consider carefully the appropriate bank size, manage the cost structure well, implement the rational interest rate policy, and manage the credit risks and other risks prudentially. Bank returns are also strongly affected by macroeconomic variables, suggesting that macroeconomic policies to promote low inflation and high GDP growth rate to have good impacts on bank profitability and development.