Diversification and Bank performance: The case of Vietnamese commercial banks

Abstract

This study aims at the impacts of diversification strategies on the Vietnamese bank’s performance. Using a sample of 13 listed banks from 2010 to 2019 and System Generalized Method of Moments (Sys-GMM) regression method, the author finds that income diversification results to lower bank profitability, as measured by the bank’s return on assets and return on equity. In contrast, banks that are less dependent to the deposit have higher profitability. Also, the author explores that joint-stock banks with larger size, higher asset quality, and more capitalized tend to have higher performance. The empirical results suggest Vietnamese banks to diversify their sources of fundings and improve their operational efficiency, especially in non-traditional activities.