Profitable Investment Channels of Vietnamese Commercial Banks (2018–2024)
Abstract
:1. Introduction
2. Literature Review
3. Research Model
- (1)
- Lending activities: Individuals and economic organizations in need of capital will borrow it from commercial banks, creating income from interest on lending activities. The capital source for banks to use for lending is customer deposits, so there is an interest expense on deposits. The profit from this activity is the difference between loan interest and deposit interest arising during the period. The profit from lending activities does not yet offset the provision for credit risk. The contribution of profit from lending activities is determined by the ratio of net interest income (i.e., net profit) to the total net income of all banking activities. From this, hypothesis H1 is formulated: The net interest income ratio has a positive impact on the ROA of commercial banks.
- (2)
- Service activities: Commercial banks provide non-cash payment services, guarantee services, factoring services, etc., to customers. Commercial banks charge customers fees for all of these activities, generating income for the bank. The contribution of profit from service activities is determined by the ratio of the net income (i.e., net profit) from service activities to the total net income of all banking activities. Based on this, hypothesis H2 is formed: The ratio of net income from service activities has a positive impact on the ROA of commercial banks.
- (3)
- Foreign exchange trading activities: These are special activities of Vietnamese commercial banks when they are allowed to reserve buy and sell all foreign currencies for profit purposes. From the fluctuations in foreign currency prices according to the international market, the difference between the buying price and the selling price will be the source of profit from these activities. The contribution of profit from foreign exchange trading activities is determined by the ratio of the net income (i.e., net profit) from this activity to the total net income of all banking activities. Based on this, hypothesis H3 is formed: The ratio of net income from foreign exchange trading activities has a positive impact on the ROA of commercial banks.
- (4)
- Trading securities activities: Banks repurchase and sell securities, mortgage and discount securities with maturity dates, and create short-term valuable papers with the aim of increasing liquidity and creating more profit for the bank. This activity is a short-term investment of the bank. The contribution of profits from trading securities is determined by the ratio of the net income (i.e., net profit) from this activity to the total net income of all banking activities. Based on this, hypothesis H4 is formed: The ratio of the net income from trading securities has a positive impact on the ROA of commercial banks.
- (5)
- Investment securities trading activities: These activities involve the bank selecting a number of securities with good profit opportunities to buy for long-term investment in order to enjoy interest, dividends, and the opportunity for stock price increases in the future. These activities are a long-term investment of the bank. The contribution of profit from investment securities trading activities is determined by the ratio of the net income (i.e., net profit) from this activity to the total net income of all banking activities. Based on this, hypothesis H5 is formed: The ratio of the net income from investment securities trading activities has a positive impact on the ROA of commercial banks.
- (6)
- Capital contribution to buy shares: Commercial banks also participate in capital contribution activities to invest in subsidiaries, joint ventures, and associates in the form of buying shares for investment. Every year, the bank will receive interest and dividends from this investment capital contribution activity. The contribution of profit from equity investment activities is determined by the ratio of the net income (i.e., net profit) from this activity to the total net income of all banking activities. Based on this, hypothesis H6 is formed: The ratio of the net income from equity investment activities has a positive impact on the ROA of commercial banks.
- (7)
- Other unusual activities are activities that do not belong to the six groups of investment and business activities mentioned above. They are usually fines, contract compensation, or debts recovered after debt settlement. The contribution of profit from other activities is determined by the ratio of the net income (i.e., net profit) from other activities to the total net income of all banking activities. Based on this, hypothesis H7 is formed: The ratio of the net income from other activities has a positive impact on the ROA of commercial banks.
4. Results and Discussion
5. Conclusions
Funding
Institutional Review Board Statement
Informed Consent Statement
Data Availability Statement
Acknowledgments
Conflicts of Interest
References
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Sign | Variable | Measure | Source |
---|---|---|---|
ROA | Return on Assets | ROA = | Yuan et al. (2022), P. D. Nguyen (2024) |
X1 | Net interest income ratio (from lending activities) | X1 = | The bank’s business performance report |
X2 | Net profit margin from service activities | X2 = | The bank’s business performance report |
X3 | Net profit margin from foreign exchange trading | X3 = | The bank’s business performance report |
X4 | Net profit margin from trading securities | X4 = | The bank’s business performance report |
X5 | Net profit margin from trading investment securities | X5 = | The bank’s business performance report |
X6 | Net profit margin from other operations | X6 = | The bank’s business performance report |
X7 | Rate of income from capital contribution to purchase shares | X7 = | The bank’s business performance report |
X8 | Loan loss provision ratio | X7 = | Thanh et al. (2022), Ahamed (2017), Pervan et al. (2015) |
X9 | Inflation | Consumer price index | Niraula and Maharjan (2024), Phan et al. (2020) |
X10 | Economic growth | X10 = | Niraula and Maharjan (2024), Phan et al. (2020) |
X11 | Systemic risk | Value 1 is obtained during the COVID-19 period, from Q1 2020 to Q2 2022; otherwise, value 0 is obtained | This is the timeline of the COVID-19 pandemic in Vietnam |
Variable | Y (%) | X1 (%) | X2 (%) | X3 (%) | X4 (%) | X5 (%) | X6 (%) | X7 (%) | X8 (%) | X9 (%) | X10 (%) | X11 |
---|---|---|---|---|---|---|---|---|---|---|---|---|
Mean | 0.307 | 78.227 | 10.20 | 2.286 | 0.387 | 3.902 | 4.482 | 0.312 | 0.304 | 2.972 | 5.511 | 0.259 |
Std. Dev | 0.240 | 23.934 | 11.017 | 14.318 | 1.542 | 9.107 | 30.024 | 1.641 | 0.422 | 1.415 | 1.841 | 0.483 |
Min | −0.36 | −71.31 | −116.58 | −353.09 | −15.37 | −87.18 | −404.54 | −0.87 | 0 | 0.29 | 0.39 | 0 |
Max | 1.750 | 356.97 | 105.97 | 43.48 | 15.03 | 84.64 | 451.31 | 37.38 | 7.55 | 5.56 | 7.83 | 1 |
ROA | X1 | X2 | X3 | X4 | X5 | X6 | X7 | X8 | X9 | X10 | |
---|---|---|---|---|---|---|---|---|---|---|---|
X1 | −0.187 (0.000) | ||||||||||
X2 | 0.277 (0.000) | −0.480 (0.000) | |||||||||
X3 | −0.029 (0.436) | −0.261 (0.000) | 0.056 (0.130) | ||||||||
X4 | 0.164 (0.000) | −0.168 (0.000) | 0.083 (0.026) | −0.019 (0.601) | |||||||
X5 | 0.046 (0.214) | −0.310 (0.000) | −0.013 (0.720) | −0.043 (0.251) | 0.128 (0.001) | ||||||
X6 | 0.058 (0.120) | −0.461 (0.000) | 0.046 (0.219) | −0.009 (0.817) | 0.116 (0.002) | −0.106 (0.004) | |||||
X7 | 0.067 (0.072) | −0.117 (0.001) | 0.115 (0.002) | 0.214 (0.000) | 0.213 (0.000) | −0.084 (0.023) | 0.153 (0.000) | ||||
X8 | 0.229 (0.000) | −0.231 (0.000) | 0.142 (0.000) | 0.004 (0.709) | 0.174 (0.000) | −0.001 (0.019) | 0.265 (0.000) | 0.036 (0.327) | |||
X9 | −0.047 (0.203) | 0.086 (0.021) | −0.068 (0.067) | −0.089 (0.016) | −0.048 (0.198) | −0.114 (0.002) | 0.017 (0.637) | 0.030 (0.418) | 0.008 (0.829) | ||
X10 | 0.127 (0.001) | −0.006 (0.877) | 0.063 (0.090) | −0.040 (0.280) | −0.060 (0.105) | 0.036 (0.336) | −0.029 (0.430) | −0.027 (0.464) | 0.046 (0.210) | 0.011 (0.000) | |
X11 | −0.057 (0.122) | 0.068 (0.064) | −0.017 (0.643) | −0.013 (0.723) | −0.117 (0.002) | −0.130 (0.000) | 0.020 (0.595) | 0.003 (0.295) | −0.014 (0.695) | 0.419 (0.000) | −0.304 (0.000) |
No | Test | p-Value | Conclusion |
---|---|---|---|
1 | Breusch–Pagan/Cook–Weisberg test for heteroskedasticity | chi2 (1) = 29.26 Prob > chi2 = 0.000 < 5% | Accept H1: heteroscedasticity |
2 | White’s test for heteroscedasticity Skewness Kurtosis | p-value = 0.033 < 5% p-value = 0.6452 > 5% p-value = 0.0757 > 5% | -Heteroscedasticity -Data is normally distributed |
4 | Wooldridge test for autocorrelation in panel data | F(1, 26) = 0.234 Prob > F = 0.633 > 5% | No autocorrelation |
5 | Test for endogeneity | Wu-Hausman F(1, 687) = 58.885 p-value = 0.000 < 5% | There is an endogenous phenomenon |
ROA | G_GMM | GMM2S Robust | ||||
---|---|---|---|---|---|---|
ROA | Coef | Std. Err. | p > |z| | Coef | Robust Std. Err. | p > |z| |
L1.ROA | −0.072 | 0.1369 | 0.597 | |||
X1 | 0.070 | 0.0264 | 0.008 | 0.009 | 0.0022 | 0.000 |
X2 | 0.061 | 0.0260 | 0.018 | 0.013 | 0.0024 | 0.000 |
X3 | 0.073 | 0.0262 | 0.006 | 0.012 | 0.0023 | 0.000 |
X4 | 0.014 | 0.0348 | 0.687 | 0.025 | 0.0055 | 0.000 |
X5 | 0.070 | 0.0268 | 0.009 | 0.006 | 0.0024 | 0.009 |
X6 | 0.070 | 0.0263 | 0.008 | 0.010 | 0.0022 | 0.000 |
X7 | −0.008 | 0.0399 | 0.830 | −0.001 | 0.0038 | 0.723 |
X8 | −0.219 | 0.0250 | 0.000 | −0.216 | 0.0413 | 0.000 |
X9 | 0.003 | 0.0049 | 0.552 | 0.008 | 0.0082 | 0.330 |
X10 | 0.059 | 0.0161 | 0.000 | 0.085 | 0.0227 | 0.000 |
X11 | −0.010 | 0.0043 | 0.023 | −0.007 | 0.0047 | 0.111 |
cons | −6.460 | 2.6273 | 0.014 | −0.732 | 0.2232 | 0.001 |
Number of groups | 27 | Hansen J statistic (overidentification test of all instruments): 201.510 | ||||
Number of instruments | 25 | |||||
Arellano–Bond test for AR(1) in first differences: z = −1.97 | Pr > z = 0.049 | Chi-sq(1) p-val = 0.000 | ||||
Arellano–Bond test for AR(2) in first differences: z = 1.53 | Pr > z = 0.126 | Included instruments: X1, X2, X3, X4, X5, X6, X7, X8, X9, X10, X11 | ||||
Sargan test of overid. restrictions: chi2(12) = 5.08 | Prob > chi2 = 0.955 | Excluded instruments: L.roa | ||||
Hansen test of overid. restrictions: chi2(12) = 12.22 | Prob > chi2 = 0.428 | Duplicates: X1 |
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Pham, V.T.H. Profitable Investment Channels of Vietnamese Commercial Banks (2018–2024). J. Risk Financial Manag. 2025, 18, 182. https://doi.org/10.3390/jrfm18040182
Pham VTH. Profitable Investment Channels of Vietnamese Commercial Banks (2018–2024). Journal of Risk and Financial Management. 2025; 18(4):182. https://doi.org/10.3390/jrfm18040182
Chicago/Turabian StylePham, Van Thi Hong. 2025. "Profitable Investment Channels of Vietnamese Commercial Banks (2018–2024)" Journal of Risk and Financial Management 18, no. 4: 182. https://doi.org/10.3390/jrfm18040182
APA StylePham, V. T. H. (2025). Profitable Investment Channels of Vietnamese Commercial Banks (2018–2024). Journal of Risk and Financial Management, 18(4), 182. https://doi.org/10.3390/jrfm18040182