Non-performing loans and bank profitability: evidence from Vietnam

Abstract

ABSTRACT This paper analyzes the determinants of NPLs and the impact of NPLs on bank profitability in Vietnam during the period 2005–2020 via panel data estimation techniques. Our findings show that bank profitability, bank size and economic booming improve NPLs while operating cost, loan loss provisions and macro factors deteriorate NPLs. Economic booming, economies of scale and bank returns improve loan quality while higher policy rates, poor loan monitoring and credit risk deteriorate it. The COVID-19 pandemic affects NPLs but its impact is still not visible and hence the postponed effect.