Impact of Covid-19 pandemic on factors affecting profitability of commercial banks in Vietnam

Abstract

This study evaluates the impact of the COVID-19 pandemic on the profitability determinants of commercial banks in Vietnam by comparing the pre- and post-pandemic periods. Employing Feasible Generalized Least Squares (FGLS), the study analyzed data from 15 commercial banks in Vietnam over 11 years, from 2012 to 2022, focusing on Return on Assets (ROA). Results reveal that equity size, demand deposits, and bank size significantly and positively influenced ROA, whereas expense management negatively affected profitability. Specifically, the pandemic intensified the influence of equity size and increased the importance of demand deposits and bank size, while reducing the significance of inflation rates. The exchange rate consistently showed an insignificant impact across both periods. Thus, the pandemic distinctly shifted the relative importance of factors influencing bank profitability, emphasizing equity management and deposit mobilization strategies. These insights suggest that effective expense control and strategic adjustments in equity and asset management are essential for banks to enhance resilience and profitability during economic disruptions.