"4, UNIVERSITY OF ECONOMICS AND BUSINESS FACULTY OF FINANCE AND BANKING Or’ 90O- GRADUATION THESIS IMPACT OF NON-INTEREST INCOM ON BUSINESS PERFORMANCE OF COMMERCIAL BANKS IN VIETNAM TEACHER INSTRUCTION : Dr. LUU NGOC HIEP STUDENT NAME : NGUYEN THUY DUONG STUDENT CODE : 19050635 CLASS : QH2019-E TCNH CLC2 HANOI, 2023 DECLARATION I hereby declare that this graduation thesis is my own work, with the support of my supervisor, and has not copied the work of others. This is my own research work. The data and secondary information used in the thesis are sourced and clearly cited.
This statement is entirely my responsibility. Student (Sign ) Nguyễn Thùy Dương RECOGNITION During the process of making and completing my graduation thesis, I have received help and support from many sides. First of all, I would like to thank my mentor — Dr. Luu Ngoc Hiep.
He is a person who is always dedicated, enthusiastic to guide and guide me throughout the time of researching and writing this thesis. In addition, through the thesis, I would like to express my deepest gratitude to the teachers who are teaching at the University of Economics - Vietnam National University, Hanoi, who have instilled in me the passion and knowledge of economics. from basic subjects to specialized subjects. The lectures have helped me to have background knowledge about the major in Finance - Banking which I am studying, from which I can complete this research topic.
Finally, I would like to thank my classmates and family, who have always been by my side and supported me throughout the process of writing this thesis. TABLE OF CONTENTS DECLARATION .0100090008090098 3 LIST OF TABLES .cccssssssssssssscesscssssssesssessscssnssscssesssesessssessssssesssssesssessssssesssassssssessseesesees 6 LIST OF FIGURES. 8 CHAPTER 1: INTRODUC TIONN.50 006 0300050086801804600408040886 9 CHAPTER 2: LITERATURE RIEVIEW. SG cọ TT TT 000000060010 8006 066 11 2.
THEORETICAL BASIC OF NON-INTEREST INCOME OF COMMERCIAL BANK. nọ cọ HT. REVIEW OF RELATED LITERA TURE. MAIN TRENDS IN CHANGES IN INCOME STRUCTURE AT VIETNAMESE COMMERCIAL BANK.
THE TREND OF INCOME RESTRUCTURING OF VIETNAMESE BANKS IN RECENT TIIMIES. EXPERIENCE IN DEVELOPING NON-CREDIT SERVICES OE SOME BANKS IN THE WORLD. OPPORTUNITIES TO REALIZE THE TARGET OF INCOME RESTRUCTURING. LIMITATION IN THE DEVELOPMENT OF NON-CREDIT SERVICES IN VIETNAM.
EXPERIENCE FOR VIETNAMESE COMMERCIAL BANKS.sscsssssssssscssssessssssesssnssscssessssssesssessssssesssessesssesssessessseseeeses 21 CHAPTER 3: METHODOLOOYY. RESEARCH CONNTIEÌNT. RRESEARCH HYPO THESIS. MEASURE BUSINESS PERFORMANCCE.
MEASURE CONTROL VARIA BLLES. 0 10 000001800100006008000804 28 CHAPTER 4: EMPIRICAL RESULTS. RESULT OF REGRESSION ANALYSIS. DISCUSSING RESEARCH RIESUL/TTS.
CHAPTER SUMMMA RRYY. 00096 40 CHAPTER 5: CONCLUSION AND RECOMMENDA TION.-<ccSS se <ssee 41 5. CONCLUSION AND POLICY IMPLICA TIONS. THE RESEARCH CONTRIBUTIONS.
LIMITATIONS AND RECOMMENDATIONS OF THE RESEARCH. 016006060908 45 References in English. 000400000 45 References in V€{TIAIT€SC.0609 000049600 006096 45 LIST OF TABLES Serial Table name Page 1 Table 1: Description of variables in research models 29 2 Table 2: Descriptive statistics of variables 30 3 Table 3: Correlation matrix table of variables in the model 32 4 Table 4: Summary of the results of three models OLS, FEM, REM 33 5 Table 5: Estimation results after fixing model defects 34 LIST OF FIGURES Serial Table name Page 1 Chart 1: ROE and ROA of commercial banks in the period 2018-2022 29 Chart 2: Growth of non-interest income components to total income of commercial banks in 2018 - 2022 ABSTRACT The bank profit mainly from traditional activities is credit, but credit contains many risks due to banks in a passive position when granting credit to customers. When diversifying types of services, expanding non -profit business activities, the bank will use thoroughly and effectively technical facilities and staff of each bank, due to the bank, due to So will reduce management costs, operate costs, increase maximum profits for the bank.
This article uses data from the financial statements of 27 Vietnamese commercial banks and the General Statistics Office of Vietnam for the period of 2018 - 2022 to study the impact of non -interest income on the bank's business efficiency. With the following objectives: income from service activities as a percentage of total income, income from foreign currency transactions as a percentage of total income, income from the sale of securities as a percentage of total income, and income from capital contributions and share purchases on the total revenue, the increase in the bank's total assets, the proportion of loans to customer deposits, and the equity to total assets. According to research findings, financial metrics relating to non-interest income have an identical impact on how well commercial banks operate. Since then, investigate and suggest ways to diversify non-interest- generating business ventures to boost financial efficiency and reduce risks for Vietnamese commercial banks.
Keywords: Interest income, business efficiency, commercial banks. CHAPTER 1: INTRODUCTION Banks are forced to broaden their service offerings as a result of the market economy's growth, business diversification, and rising demand for financial and banking services. The goal is to offer consumers and the economy a wide variety of financial products in a timely, flexible, and high-quality manner. Banks reduce expenses in terms of human resources and technology when they increase their activities in commission, fee, investment, business, etc.
services (Baele et al. More data can be gathered concurrently, allowing for the development of more activities, the cross-selling of existing items with consumers, and the exploitation of customer relationships for the marketing of additional existing products in order to boost market share, revenue, and profit. Service fees include money transfer fees, check payment fees, entrustment and consulting fees, card service fees, account management fees, and service usage fees will increase as non- interest commercial activities expand. banking online and other sources of revenue.
In addition to having the benefit of supplying a large client base, non-credit activities also assist other operations and serve a complementary function, which helps to indirectly profit from these activities by, for example, creating new jobs. By using a staff payroll service, maintain organization payment deposit accounts and issue payment cards. In addition to net interest income from traditional business activities of raising capital and lending, Vietnamese commercial banks now also expand their income sources from service provision and foreign business activities. exchange, buy and sell securities, contribute capital and buy shares of other enterprises.
These sources of income are collectively referred to as non- interest income. The rapid and uncontrolled expansion of non-interest income sources can put banks at risk and suffer great losses, especially income sources from high-risk activities such as foreign exchange trading, purchasing sell securities. Therefore, studying the impact of non- interest income activities on the business performance of banks in Vietnam is an urgent topic. In recent years, Vietnam's banking industry has gradually shifted the income structure of banks between interest income and non-interest income.
While it is indisputable that this change represents a relevant step forward as profits are higher, there is nevertheless some doubt as to the impact this change will have on commercial banks as a whole. So, the fundamental question that I address in this article is: does this change positively affect risk-adjusted bank profitability. Or vice versa, does the increase in non-interest income lead to the unstable growth of profits? The results of the study's empirical analysis suggest a positive answer to that question: that for Vietnamese commercial banks, the shift to non-interest income generating activities has proven to be a helpful. In addition, our findings suggest that the diversification benefit associated with non-profit revenue declines with bank size: small banks gain financial performance from increasing external income.
very small profit; performance gains appear to be linked to non- interest income in general, not to the specific line of business that generates that income. The profitability of commercial banks has been positively impacted by non-interest income, according to numerous studies conducted worldwide, including those by Smith et al. (2003), Chiorazzo et al. (2008), Elsas et al.
(2010), and Gurbuz et al. Researchers Nguyen Minh Sang & Nguyen Thi Thuy Trang (2018) and Huynh Thi Huong Thao & colleagues (2021) have uncovered evidence of the beneficial effect of non-interest revenue on bank profitability in Vietnam. The aforementioned studies, however, do not examine the effects of each income group, simply the aggregate effect of total non-interest income on bank profitability. In-depth analysis is done in this study to determine how each non-interest income source affects bank profitability.
The study's findings then play a crucial role in assisting bank managers in identifying actions that significantly and favorably affect the profitability and operational performance of banks. where proper operating and management policies can be established. The study's findings can also be used as a guide to aid securities investors in reading and evaluating bank financial statements, particularly the information contained in non-interest income statements, in order to provide a stronger foundation for choosing potential banks' stocks. Academically, this study has aided in the provision of concrete evidence about the effects of elements affecting the profitability of commercial banks, including income from services, income from foreign exchange trading, income from securities trading, and income from capital contribution and share purchase.
Which of the aforementioned non-interest income categories positively affects the profitability of commercial banks?, The research findings help us understand. What is the relationship between these income components and the profitability of the bank? Since then, the study's findings have added to the body of knowledge about how non- interest revenue factors affect Vietnamese commercial banks' operational success. In the next part of the article, we take a brief look at the aforementioned literature and previous studies on the impact of non-interest income on the risk and profitability of commercial banks; main trends in income structure at Vietnamese commercial banks. Section 3 describes the data and research methods.
Section 4 is the result of empirical research and discussion. The final section is the conclusion and policy implications of the study. 10 CHAPTER 2: LITERATURE REVIEW 2. CHAPTER INTRODUCTION This chapter provides an overview of the effect of non-interest income on the performance of commercial banks and discusses some important theories.
By looking at both empirical facts and the econometric techniques used in previous studies, we can better understand how these two variables interact. Finally, the study aims to draw attention to potential directions of investigation for further exploration. THEORETICAL BASIC OF NON-INTEREST INCOME OF COMMERCIAL BANK Peter S. Rose (1998) said that commercial banks are the most important intermediary financial institutions in the market economy, transferring capital from places of excess to places of shortage.
However, in terms of the nature of commercial banks as an enterprise, business activities with the goal of maximizing profits within the allowable level of risk. Therefore, the evaluation of business performance of commercial banks is also based on theoretical foundations such as evaluating the business performance of an enterprise, and at the same time it is necessary to consider the specific characteristics of commercial banks. In a narrow sense, the view on business efficiency of commercial banks is the ability to generate profits, while ensuring the safety of the bank's operations in accordance with regulations and limiting risks. In a broad sense, Chang et al.
(2010) in their study of the commercial banking system in Taiwan, said that business efficiency is not only concerned with profits, but also profits from financial structure. liabilities and assets must be reasonable, profit growth trend is stable. The operational efficiency of commercial banks also shows the ability to manage, control costs, and use resources to create outputs. Commercial banks use resources such as labor, facilities, and financial resources for deposit, lending and investment activities as a basis for determining the level of efficiency and impact factors.
There are many views on the business performance of commercial banks. According to Farrell (1957), efficiency is a commonly used category to assess an entity's ability to maximize its revenue output given given input costs, or in other words efficiency. Results are the benefits resulting from a particular activity.