The impact of non-interest income on profitability of Vietnamese commercial banks

Abstract

Decision No. 254/QD-TTg in 2012 on restructuring the system of credit institutions and Decision No. 986/QD-TTg in 2018 on development strategies of the banking industry related to diversity income, gradual transformation of banks’ business models in the direction of reducing dependence on credit activities and increasing income from non-credit services. This article aims to study the impact of non-interest income on the bank’s profitability with the following criteria: profit after tax on assets average (ROAA), profit after tax on equity average (ROEA), net interest margin (NIM) through regression models Pooled OLS, FEM, REM, GMM. The research’s results show that noninterest income has a positive impact on ROAA and ROEA but has a negative impact on NIM, thereby proposing solutions to diversify non-interest business activities to improve profitability of Vietnamese commercial banks.