Research Paper
Year: 2021 | Month: November | Volume: 8 | Issue: 11 | Pages: 32-43
DOI: https://doi.org/10.52403/ijrr.20211106
Bank Ownership vs Credit Growth: Empirical Evidence from Vietnamese Commercial Banks
Nam V. Nguyen1, Ngoc T. Nguyen2, Mai T.T. Ngo3, Hoang D. Le4, Trang T.T. Nguyen5, Tam T. Le6
1,3,6School of Banking and Finance, National Economics University, Vietnam
2International School of Management and Economics, National Economics University, Vietnam
4,5Faculty of Economic Mathematics, National Economics University, Vietnam
Corresponding Author: Tam T. Le
ABSTRACT
This paper is aimed at analyzing the relationship between bank ownership and credit growth of Vietnamese commercial banks. With the data of 20 commercial banks in period 2009-2018 period, the REM method is applied.
The key findings are: First, credit growth rate of state-owned commercial banks in Vietnam is higher than of private commercial banks, which is opposite to the expected signal. The main reasons are (i) decision making of state-owned commercial banks on lending are backed by the government, which is more straight-forward than private banks; (ii) State Bank of Vietnam considers credit policy as one of the important monetary policy tools, of which state-owned commercial banks are the key drivers; (iii) state-owned commercial banks have stable and cheap funding sources, which create the good base for expanding credit with cheap interest rates. Second, asset size does not have any impact on credit growth. Credit growth rates are determined by the bank’s overall performance and maximum growth rate set by State Bank of Vietnam, not on assets. Third, the other bank-specific factors are statistically significant with credit growth, of which liquidity and ROA have the strongest influences.
Recommendations for better credit growth management of commercial banks include: (i) State Bank of Vietnam and the Government to ensure soundness of the banking system, including applying the Basel II requirements to all banks; and establish more support packages in order to boost the lending activities of privately-owned banks. (ii) Commercial banks to reduce its non-performing loans in order to stimulate the growth in lending.
Keywords: bank liquidity, bank ownership, credit growth, non-performing loans, ROA.
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