Factors affecting non-interest income at Vietnamese commercial banks

This study reviews the theoretical foundations of banks’ non-interest income (NII) and the standard financial indicators used to measure it. Based on this review, the study develops a framework that links bank-specific (internal) and macroeconomic factors to NII in Vietnamese commercial banks. A critical review of both domestic and international literature is conducted to identify areas of theoretical agreement and remaining research gaps. From this review, the study formulates context-specific research hypotheses and an empirical model for Vietnam. Using an unbalanced panel dataset of 24 Vietnamese commercial banks from 2011 to 2023, the study estimates several panel regression models. After conducting specification tests, the random-effects model (REM) is selected, and issues related to error variance are addressed using Feasible Generalized Least Squares (FGLS). The results show that bank size, deposit-to-asset ratio, credit risk provision ratio, income diversification, inflation, and the COVID-19 pandemic have a positive effect on NII, while loan-to-asset ratio and state ownership have a negative effect. Equity ratio and real GDP growth are not statistically significant. Based on these findings, the study offers policy implications to improve banks’ operational efficiency.