The impacts of equity on profitability and non-interest income of Vietnamese commercial banks

Abstract

Equity is an important financial factor, showing the size of banks and reflecting bank’s ability to guarantee debts to customers. Large equity will create a lot of prestige for banks in the market, facilitating expansion and development. The larger the equity, the higher the bank’s endurance, especially in the difficult period of business operations, the greater the ability to generate profits because it can diversify income from business operations. This article uses data from financial statements of 31 Vietnamese commercial banks and the General Statistics Office of Vietnam for the period 2008 - 2020 to study the impact of equity on bank’s profitability and non-interest income with the following criteria: profit after tax on average total assets, profit after tax on average equity and non-interest income through generalized method of moments model. The research results show that equity has a positive impact on profit after tax on average total assets, but has negative impacts on profit after tax on average equity and non-interest income. Since then, the study has proposed some solutions on equity to increase profit and non-interest income of Vietnamese commercial banks.