0120 the impact of credit growth on profitability and credit risk the case of vietnamese commercial banks 2021

MINISTRY OF EDUCATION AND TRAINING STATE BANK OF VIETNAM BANKING UNIVERSITY OF HO CHI MINH CITY NGUYEN TRAN THANH TRUC THE IMPACT OF CREDIT GROWTH ON PROFITABILITY AND CREDIT RISK: THE CASE OF VIETNAMESE COMMERCIAL BANKS BACHELOR THESIS PROPOSAL MAJOR: FINANCE – BANKING NUMBER: 7340201 HCMC, NOVEMBER 2021 MINISTRY OF EDUCATION AND TRAINING STATE BANK OF VIETNAM BANKING UNIVERSITY OF HO CHI MINH CITY NGUYEN TRAN THANH TRUC THE IMPACT OF CREDIT GROWTH ON PROFITABILITY AND CREDIT RISK: THE CASE OF VIETNAMESE COMMERCIAL BANKS BACHELOR THESIS PROPOSAL MAJOR: FINANCE – BANKING NUMBER: 7340201 INSTRUCTOR: DR NGUYEN THI HONG VINH ABSTRACT The objectives of this study are to: (i) Study the impact of bad debt on profitability and credit risk of Vietnamese commercial banks (ii) Determination of effective credit growth threshold Research using GMM dynamic panel data estimation to evaluate the impact of credit growth on the performance of Vietnamese commercial banks in the period 2012-2020 And Hansen's PTR threshold model (1999) to estimate credit growth threshold The research results show that credit growth with a lag of to years has a positive impact on ROA and has a positive effect on NPL This positive relationship shows that lending is still a driving force for profitability of Vietnamese commercial banks and an excessive increase in outstanding loans will lead to a narrower amount of loanable credit and an increase in bad debt The study also finds the optimal credit growth threshold at which the initial credit growth is also positive with ROA but beyond that point will be opposite In addition, the thesis has made important contributions to Vietnam's policy makers in stabilizing the banking system as well as to bank administrators in controlling credit growth well to increase profits and minimize risks Keywords: Credit growth, credit growth threshold, Vietnamese commercial banks iii PROMISE The author declares that this thesis has never been submitted for a doctorate degree at any university This thesis is the author's own research work, the research results are honest, in which there are no previously published contents or contents made by others except the cited sources fully in the thesis The author assumes full responsibility for his honour statement Ho Chi Minh City, November 29, 2021 Author Nguyễn Trần Thanh Trúc ACKNOWLEDGEMENTS First of all, I would like to express my deep gratitude to Dr Nguyen Thi Hong Vinh for her dedicated guidance and wholehearted support in assisting me in performing estimation techniques, providing research data, correcting errors even though she is busy with work but always help me immediately when I need it And importantly, her research is a great source of inspiration and encouragement because of the thoughtfulness, seriousness, and insight I recognize in each of her research papers I would also like to express my gratitude from the bottom of my heart to my mother who sacrificed her time to take care of me, who was always busy from early morning to late evening so that I could have precious time to this thesis and not have to worry about anything other than focusing on the thesis I would also like to thank every lecturer at Banking University of Ho Chi Minh City, whether I have studied face-to-face or only read through books The valuable knowledge the teachers teach will follow me for the rest of my life I would like to thank my friends who studied at Banking University, especially Phong, I learned a lot of virtues from you, enthusiasm, patience, curiosity, both competition and support over a four-year period Finally, I thank the people who did not appear in my life directly, but have provided me with immense spiritual support: Zen master Thich Nhat Hanh, Jared Diamond author of Guns, Germs and Steel, Elon Musk CEO of SpaceX and Tesla, Megan Rapinoe American professional soccer player And most of all, I am extremely happy in every moment of my life, including the difficult period when doing the thesis, because I have learned the teachings of the Buddha LIST OF ACRONYMS GDP Gross domestic product GMM Generalized method of moments IMF International Monetary Fund PTR Panel Threshold Regression FEM Fixed Effect Model REM Random Effect Model SOCB State-Owned Commercial Bank JSCB Joint Stock Commercial Bank SBV State Bank of Vietnam LIST OF TABLES Table 2.1 Previous research summary 22 Table 2.2 Summarizing the formula of variables and the sign expectation .24 Table 4.1 Number of Vietnamese banks over time 40 Table 4.2 Statistical table describing the variables 58 Table 4.3 Correlation analysis matrix 59 Table 4.4 Multicollinearity check 60 Table 4.5 Estimated results of the dependent variable ROA by GMM method 61 Table 4.6 Results of estimating the dependent variable NPL by GMM method 66 Table 4.7 Estimate threshold CGR dependent variable ROA 71 Table 4.8 Regression results of the dependent variable ROA 71 Table 4.9 Estimate threshold CGR dependent variable NPL 72 Table 4.10 Regression results of the dependent variable NPL 72 LIST OF FIGURES Figure 2.1 Supply curve shift 16 Figure 2.2 Demand curve shift 17 Figure 2.3 Productivity shift 18 Figure 4.1 Asset size of Vietnamese joint stock commercial banks 41 Figure 4.2 Deposit amount and deposit growth rate 44 Figure 4.3 Classify customer deposits by term 45 Figure 4.4 Bank profits over the years 45 Figure 4.5 Outstanding loans and credit growth of the bank over the years .48 Figure 4.6 ROA of joint stock commercial banks over the years 49 Figure 4.7 ROE of joint stock commercial banks over the years 51 Figure 4.8 NIM of joint stock commercial banks over the years 52 Figure 4.9 Non-performing loan of Vietnam's banking industry over the years .54 Figure 4.10 Structure of credit balance by industry 55 Figure 4.11 Provision ratio of Vietnam's banking industry over the years 57 Figure 4.11 Non-linear model testing 70 LIST OF APPENDIXS Appendix1: Estimation results of GMM dependent variable ROA model A Appendix 2: Result of GMM estimation of dependent variable ROA model .B Appendix 3: Result of GMM estimation of dependent variable NPL model C Appendix 4: Estimation results of GMM dependent variable NPL model D Appendix 5: Threshold model checks for non-linearity between ROA and CGR^2 .E Appendix 6: Threshold model checks for nonlinearity between NPL and CGR^2 .F Appendix 7: Credit growth threshold with dependent variable ROA G Appendix 8: Credit growth threshold with dependent variable NPL H TABLE OF CONTENT ABSTRACT i PROMISE ii ACKNOWLEDGEMENTS iii LIST OF ACRONYMS iv LIST OF TABLES v LIST OF FIGURES vi CHAPTER 1.1 The importance of research topic 1.2 Relevant research situation and research problem 1.3 Research Objectives 1.4 Research Scope and Subject 1.5 Research Methods 1.6 New contributions of the study 1.7 Research process and structure of the thesis CHAPTER 2.1 Concept of credit growth, profitability and credit risk 2.1.1 Concept of credit growth 2.1.2 Concept of profitability and credit risk 10 2.2 Theoretical basis of credit growth 13 2.2.1 Theory of macroeconomic factors 13 2.2.2 Theory of bank-specific factors 15 2.3 Review of previous studies 19 CHAPTER3 23 3.1 Research models 23 3.1.1 Model of the impact of credit growth on bank profitability .26 3.1.2 Model of the impact of credit growth on credit risk .31 3.1.3 Credit growth threshold model 34 3.2 Research Methods 34 3.3 Research data 35 3.4 Data collection source 35 ... Concept of credit growth, profitability and credit risk 2.1.1 Concept of credit growth 2.1.2 Concept of profitability and credit risk 10 2.2 Theoretical basis of credit growth. .. 4.2.2 Profitability growth situation 48 4.2.3 Credit risk situation 53 4.3 Examining the impact of credit growth on profitability and credit risk of Vietnamese commercial banks. .. representative of the group of commercial banks in Vietnam At the same time, the thesis focuses on the main target groups: (i) Credit growth and its impact on profitability of Vietnamese commercial banks