Vietnamese Banks Research Articles

THE EFFECTS OF COMPETITION ON EFFICIENCY: THE VIETNAMESE BANKING INDUSTRY EXPERIENCE

Given considerable changes in the Vietnamese banking environment brought about by significant reforms towards liberalization during the last two decades, this study investigates the evolution of competition and efficiency, compares the competition and efficiency of state-owned banks to joint-stock banks, and then tests the “quiet life” hypothesis in this industry over the period 2000–2014. This study employs the efficiency-adjusted Lerner index (i.e., market power) to capture competition, and the cost efficiency estimated by a Fourier-flexible function stochastic frontier analysis (SFA) to capture bank efficiency. This study firstly finds a slight improvement of competition and cost efficiency in the Vietnamese banking sector over the analysis period. Secondly, there are no significant differences in competition and cost efficiency level between state-owned and joint-stock banks. Thirdly, a positive causality running from competition to cost efficiency is documented, providing evidence of supporting the “quiet life” hypothesis. Finally, positive efficiency effects of the banks’ capital ratio and size are found, while insignificant impacts of the growth of GDP per capita and 2007 global financial crisis were observed. The results are strongly robust to a variety of tests. The findings suggest pro-competition, pro-capitalization and pro-size expansion policies in the Vietnamese banking sector if targeting at improving the cost efficiency of Vietnamese banks.

B+-tree construction on massive data with Hadoop

The data processing in the Socialist Republic of Vietnam (Vietnam, hereunder) is in an early stage and a variety of problems are needed to be solved. In the Vietnamese banking and financial sectors, where managing and storing of customer data and transaction histories are being emphasized as never before, the volume of data to be secured on a daily basis are explosively increasing due to rapid economic development so that the relevant authorities are seeking an efficient and reliable way to manage them. Being a widely known popular variation of B-tree, B+-tree is considered as a most adequate tree-type data structure for bulk data. Nevertheless, as it is quite time-consuming to construct a B+-tree for massive data the authors propose a Hadoop framework-based parallel B+-tree system to deal with the problem. The system is largely divided into three phases: First, data are partitioned and distributed evenly such that each partition will have almost the same amount of data volume. Second, a parallel local B+-tree system is constructed. Finally, some small-scale B+-trees are constructed and integrated into the complete form of B+-tree which will be dealing with an entire data set. The authors expect that the proposed system will offer an efficient index structuring while reducing data processing time.

Resource for Research: A Vietnamese Banking Database

This paper introduces a free and new database that provides financial analysts and researchers a comprehensive assessment of the performance of the Vietnamese banking system. This database provides statistics on the activity and efficiency of 432 bank-year observations for Vietnamese banks during the 2002-2015 period. This is the first systematic compilation of data on the split of state vs. private ownership, list vs. non-listed banks and foreign vs. domestic banks. Consequently, this arrives at a unique set of variables and indicators that allows capturing the development and performance of the Vietnamese banking sector over time along many different dimensions.

The interrelationship between net interest margin and non-interest income: evidence from Vietnam

PurposeThe purpose of this paper is to investigate the interrelationship between non-interest income (NII) and net interest margin (NIM) in the Vietnamese banking system between 2006 and 2015. Thereafter, the impact of NII on risk-adjusted returns is also examined.Design/methodology/approachVarious analysis techniques are used to achieve the research objectives.FindingsThe findings show a negative two-way link between NII and NIM, thus supporting the subsidisation hypothesis. Furthermore, NII is found to have a negative impact on risk-adjusted returns. When observing this relationship in sub-samples, the findings indicate that the negative impact of NII on risk-adjusted returns still holds in the first subsample (2006-2011). The coefficient of NII becomes positive but not significant for the subsequent period (2012-2015). In addition, the Spearman rank-order correlations of returns on assets and NII for both sub-samples are negative. Together, the author concludes that there are no diversification benefits in the Vietnamese banking system.Practical implicationsThe evidence suggests a trade-off between non-interest activities and traditional lending ones. In addition, the findings demonstrate that the Vietnamese banks may use NIIs to expand leverage and herd by coordinating NII strategy during the economic downturns. Thus, the banking system may be exposed to a greater risk. The research has implications for bank supervisors, policy-makers and bank managers.Originality/valueThis study is the first attempt to investigate the interrelationships between net NII and NIM in the Vietnamese banking system.

The Development and Measurement of a Customer Satisfaction Index (E-CSI) in Electronic Banking

In the current technological age, once traditional means of delivering services to customers are losing its dominant position, the application of the Internet has evolved as an innovatively supporting alternative for attracting customers, especially in banking service. In that aspect, customers' perception of online banking service through the delivery of website quality (Webqual) remains the main concern for bank's managers in Vietnamese banking system because customers are easily inclined to another banking service provider due to their poor website-operated experience. Based on the evaluation of factors influencing on banking website quality, its relationship to customer satisfaction and retention, this article suggests the measurement of electronic Customer Satisfaction Index (e-CSI) of perceived banking website quality by three most developed banks of Vietinbank, Vietcombank and BIDV in central Vietnam, from which provides insights that may be useful for improving the quality of online banking service.

The Determinants of Capital Adequacy Ratio: The Case of the Vietnamese Banking System in the Period 2011-2015

The analysis of a data set of observation for Vietnamese banks in period from 2011 - 2015 shows how Capital Adequacy Ratio (CAR) is influenced by selected factors: asset of the bank SIZE, loans in total asset LOA, leverage LEV, net interest margin NIM, loans lost reserve LLR, Cash and Precious Metals in total asset LIQ. Results indicate based on data that NIM, LIQ have significant effect on CAR. On the other hand, SIZE and LEV do not appear to have significant effect on CAR. Variables NIM, LIQ have positive effect on CAR, while variables LLR and LOA are negatively related with CAR.

Marketing strategy of internet-banking service based on perceptions of service quality in Vietnam

Internet banks can provide a convenient and effective method of managing personal finances because customers can easily access them without constraints of time or place. Following the international trend, Vietnam, an emerging country with a rapidly growing banking industry, is no exception in the provision of Internet-banking services. However, how to provide services that users require is an important consideration for banks that are developing service products. Although service quality is important to users when selecting banking services, the effects of perceived service quality on customer adoption of Internet-banking services have received little attention. This investigation designed a questionnaire to understand the aspects of service quality that influence intention to adopt Internet-banking services for three groups of Vietnamese customers. The descriptive variables used to determine the features of these three consumer groups are verified, and include demographics, customer behaviors, customer satisfaction, and customer loyalty. Finally, marketing strategies for the three clusters are presented to help Vietnamese banks promote Internet-banking services.

Determinants of Banks’ Capital Structure: Evidence from Vietnamese Commercial Banks

This paper investigates the important factors influencing capital structure decisions. The study focuses on the bank leverage of thirty-one Vietnamese commercial banks from 2009 to 2014, because they play a key role as financial catalysts in the growing economy of Vietnam. The analysis employs multiple linear panel regression models, namely, Ordinary Least Squares (OLS), Fixed Effects (FE), and Random Effects (RE). This research examines five bank-specific factors (i.e., size, profitability, growth rate, taxation and business risk), and three financial market and economic variables (i.e., stock market condition, economy, and inflation) influencing capital structure with debt ratio as the dependent variable. Both the OLS and FE models agree that a Vietnamese bank’s size positively affects leverage, which means that the larger the bank, the more debt is incurred. Both models also determine that stock market and economic conditions have negative effects, which implies that in good market conditions, banks lessen their debt loads. In dividing Vietnamese commercial banks into three groups of sizes (i.e., large, medium-sized and small banks) based on chartered capital, both the OLS and RE models agree that size is a positively contributing factor to leverage. However, unlike large Vietnamese banks, medium-sized and small-sized banks tend to still carry a relatively high amount of debt because they are commonly ignored by the equity markets for reasons of illiquidity and instability, pushing them to rely on borrowing funds even to the point of having higher interest rates. Another interesting finding of this paper is that, only small-sized Vietnamese banks’ leverage is negatively affected by stock market and economic conditions. Findings of this paper are robust in using two panel regression models, and can help Vietnamese banks’ managers have a general perspective regarding capital structure determinants. This study also offers insights in creating appropriate strategies to controlling factors affecting banks’ leverage to achieve the target capital structure that minimizes the cost of capital and maximizes profitability.

Measuring efficiency of Vietnamese banks

PurposeThis paper aims to examine alternative methods for treating nonperforming loans (NPLs) in bank cost-efficiency studies using stochastic frontier analysis (SFA).Design/methodology/approachThe authors consider three methods of treating NPLs in SFA: as an additional control variable, as an environmental factor or as a deduction from total loans. Using data from the Vietnamese banking system (2003-2010), the authors then compare these results with those of the base model (where total loans is used regardless of the NPLs) to see which one is more appropriate for this study.FindingsThe authors observed that the first two methods are inappropriate for the analysis: one cannot find the significant relationship between NPLs and the banks’ total cost, and the other cannot account for any inefficiency at all. The authors suggested that the third method of separating NPLs from total loans can provide better insights. Using the proposed method, the authors showed that the cost-efficiency of Vietnamese banks over the period examined was moderate with a slight decreasing trend. When NPLs are separated, the cost-efficiency decreases in state-owned banks and big banks, whereas it increases in small and private banks.Research limitations/implicationsResearch is limited to Vietnamese banks during a certain period, and it would be useful to apply the same technique to other data sets.Practical implicationsThe paper suggests a new approach to account for NPLs in cost SFA studies in banking.Originality/valueThe paper provides a much more searching analysis of NPLs in banking than has generally been seen in previous research.

Factors affecting green banking practices: Exploratory factor analysis on Vietnamese banks

This paper aims at studying the factors affecting green banking practices in Vietnam and the role of green banking in sustainable development of the Vietnamese economy. A large scale survey con-ducted with 32 banks and financial organizations in Vietnam to obtain 329 questionnaire forms in the period from May to July 2016 provides evidence for the research. By using EFA analysis and the regression model, we find that understanding the definitions of green banking, the current activities of green banking, the advantages in developing green banking, and the focused sectors have positive relationships with the willingness of Vietnamese banks to adopt green banking practices, whereas the barriers have negative relation-ships with the willingness to utilize green banking services among Vietnamese banks. From the research findings, we suggest some solutions to not only enhance the understanding of the importance of green banking in economic development but also improve the willingness to follow green banking practices among Vietnam’s banking institutions.

Factors affecting green banking practices: Exploratory factor analysis on Vietnamese banks

Factors affecting green banking practices: Exploratory factor analysis on Vietnamese banks

Changing Leadership Style in the Vietnamese Commercial Banks Before and After Vietnam Joins the WTO

This study seeks to examine the changes in leadership style in four state-owned commercial banks in Vietnam of Vietcombank, Vietinbank, BIDV and Agribank before and after Vietnam joins the WTO, from 2007 to 2015. The study used OCAI culture diagnostic models to assess four different leadership styles using questionnaires and multivariate analysis techniques (paired t test, t test, ANOVA). The research result from 1056 employees in Vietnamese banks shows that there is a shift in the leadership style between two periods before and after Vietnam joins the WTO. The study also shows a significant difference in the change level of the leadership style between banks that have increased competitive and creative factors. This conversion trend is strongly increasing as Vietnam is about to participate in the TPP.

The Interrelationship between Net Interest Margin and Non-Interest Income: Evidence from Vietnam

The findings show a negative two-way link between non-interest income and net interest margin, thus supporting the subsidisation hypothesis. Furthermore, non-interest income is found to have a negative impact on risk-adjusted returns. When observing this relationship in sub-samples, the findings indicate that the negative impact of non-interest income on risk-adjusted returns still holds in the first subsample (2006-2011). The coefficient of non-interest income becomes positive but not significant for the subsequent period (2012-2015). In addition, the Spearman rank order correlations of returns on assets and non-interest income for both subsamples are negative. Together, we conclude that there are no diversification benefits in Vietnamese banking. The evidence suggests a trade-off between non-interest activities and traditional lending ones. In addition, the findings demonstrate that Vietnamese bank may use non-interest income to expand leverage and herd by coordinating non-interest income strategy during the economic downturns. Thus, the banking system may be exposed to greater risk. Our research has implications for bank supervisors, policy-makers and bank managers.

Market of banking services of Vietnam: review, estimation and problems of development

The article reviews the state of the banking services market in Vietnam, characterized by the growth of deposit and credit services, the development of plastic cards and electronic banking services market. The following main problems of the development of the Vietnamese banking services market were revealed: the traditional nature of banking services, the lack of banking product versatility; difficulties in applying information technologies in practical banking activities; the problems of creating channels for the distribution of services, the lack of modern marketing strategies and the appropriate skills of bank staff; insufficiency and imperfection of the legislative system regulating banking services. Recommendations are offered for solving the outlined problems by the government and the State Bank of Vietnam as well as by commercial banks. The government should introduce regulatory norms on the mandatory availability of terminals to provide large business entities with plastic cards operation, support implementation of projects by Vietnamese banks, create an encouraging competitive environment in the banking system. The State Bank of Vietnam should continue to improve the legal environment for non-cash payments in general and card services, in particular. It is also necessary to update the regulatory function for debt, deposits and other banking services restructuring. Commercial banks of Vietnam should develop precise strategies for the development of banking services corresponding to their actual state; set up departments dealing with market survey and customer needs; develop the human capital of banks; strengthen coordination with the Ministry of Public Security in preventing cybercrime and ensuring the security of payment transactions. The conclusion is that the state of the banking services market in Vietnam is not optimal. There is a need for a strategic collaboration between the state and commercial banks in Vietnam in order to improve the market.

The efficiency effects of bank mergers: An analysis of case studies in Vietnam

This paper employs Data Envelopment Analysis to examine the relative efficiency for Vietnamese banks from 2008 to 2015. Efficiency level is relatively high and remains stable over the examined period, suggesting the banking system is less affected by the global financial crisis. More specifically, technical efficiency and scale efficiency in Vietnamese banking is examined when controlling for problem loans. We suggest that controlling for the exogenous impact of problem loans is important for joint-stock banks. Furthermore, our results do not support the hypothesis that acquiring banks are more efficient than the acquired banks. The efficiency improved in majority of merger cases and was not related to acquiring bank’s efficiency advantage over its targets. Small-and medium- banks should be promoted in future acquisitions as a means to enjoying efficiency gains. Finally, there are mixed results on the extent to which the benefits of efficiency gains are passed on to the public.

Vietnam Asset Management Company as a tool for improving asset quality of Vietnamese banks

Vietnam Asset Management Company as a tool for improving asset quality of Vietnamese banks

The Determinants of Commercial Bank Profitability in Vietnam

This study investigates the determinants of profitability for Vietnamese banks between 2005 and 2015 using system generalized method of moments. The findings show the persistence of profits over time. More x-efficient banks appear to be more profitable, supporting the efficient-structure hypothesis. The same is true for banks with greater lending specialization; for those with lower liquidity risk; for more-diversified banks; for listed banks and smaller banks. Interestingly, the findings demonstrate that a less concentrated banking system improves bank profitability and profits tend to persist over time, suggesting the influence of government intervention in explaining bank performance in Vietnam.

Financial Soundness of Vietnamese Commercial Banks: An CAMELS Approach

This study investigates the financial soundness of Vietnamese commercial banks between 2008 and 2013 using the combination of data envelopment analysis and CAMELS approach. These findings indicate that only one state-owned commercial bank is listed of the ten best-performing banks, suggesting that the implicit support from the government provides less incentive for these banks to improve their performance. In addition, the ten worst-performing banks are also indicated so that the State Bank of Vietnam should put more attention on supervising and monitoring them in order to strengthen the Vietnamese banking system.

The Effect of Income Diversification on Bank Risk: Evidence from Vietnam

This study examines the effect of income diversification on bank risk in Vietnam over the period of 2006 to 2014. Our findings suggest that commercial banks that have shifted to non-interest income activities tend to face greater risk. This somewhat conflicts what has been suggested by diversification strategy in terms of risk reduction. Our results demonstrate that Vietnamese banks should focus on traditional lending activities, especially for small banks in Vietnam, given that diversification may add more risk for individual banks and banking system as a whole.

Vietnamese Banking System in the Context of ASEAN Financial Integration

This paper enlightens the main features of ASEAN Banking Integration Framework (ABIF) and the requirements for Qualified ASEAN Banks (QABs). Using Moody’s evaluation method and Bankscope database for banking systems in 7 ASEAN countries, the paper compares Vietnamese banking system with the rest of the region on asset quality, capital adequacy, profitability and liquidity aspects. The results show that Vietnamese banks are relatively low-developing, and will face fierce competition from foreign banks on their home market. Measuring the effects of integration appears essential for the regulators and banks in seeking appropriate and prompt solutions to these challenges and in seizing valuable opportunities to obtain sustainable and efficient development.