Macro determinants on non-performing loans of commercial banks in Vietnam: Khóa luận tốt nghiệp Đại học / Tran Ngoc Loan

MINISTRY OF EDUCATION AND TRAINING THE STATE BANK OF VIETNAM

BANKING UNIVERSITY OF HO CHI MINH CITY

TRAN NGOC LOAN

MACRO DETERMINANTS ON

NON-PERFORMING LOANS IN VIETNAM

UNDERGRADUATE THESIS

MAJOR: FINANCE – BANKING

CODE: 7340201

HO CHI MINH CITY – 2018

MINISTRY OF EDUCATION AND TRAINING THE STATE BANK OF VIETNAM

BANKING UNIVERSITY OF HO CHI MINH CITY

TRAN NGOC LOAN

MACRO DETERMINANTS ON

NON-PERFORMING LOANS IN VIETNAM

UNDERGRADUATE THESIS

MAJOR: FINANCE – BANKING

CODE: 7340201

SUPERVISOR: MS. NGUYEN THI MY HANH

HO CHI MINH CITY – 2018

i

ABSTRACT

The global economic history has witnessed many financial crises have stemmed

from inefficient banking industry. Hence, the banking sector can be seen as the most

vital determinants of development and stability of the economy. In recent years, the

non-performing loan (NPL) problem of commercial banks in Vietnam has become

increasingly serious, raising concerns about uncertainty surrounding the banking sector

in particular and the economy in general. Many studies have found that NPLs are

determined by internal (or bank-specific) factors and external (or macroeconomic)

factors. The research is carried out to investigate the macroeconomic determinants on

NPLs of commercial banks in Vietnam from 2011 to 2016. Based on previous studies,

this research is going to collect the potential external factors such as real GDP growth

rate, inflation, unemployment and real interest rate. Dynamic panel data estimation is

employed to serve the purpose of this research. Dataset includes 17 commercial banks

during the period of 6 years from 2011 to 2016. The outcome reveals that

unemployment rate, GDP and real interest rate have significant influences on NPLs

while inflation rate and NPL in the previous year are found to be not relevant in the

case of Vietnam.

ii

ACKNOWLEDGEMENT

First of all, I would like to express my very appreciation to my supervisor Ms.

Nguyen Thi My Hanh for her sincere comments, for her patient guidance and useful

critiques of this work. Also, I would like to thank all the members of staff at High

quality department of Banking University, Ho Chi Minh City. Without their assistance,

this thesis would not be completed.

In addition, I am very grateful to my family and friends for giving the biggest

support and strength in difficult moments.

iii

AUTHOR’S DECLARATION

I hereby confirm that this thesis entitled: “Macro determinants on non￾performing loans in Vietnam”, is my own work, and none of this work has been

published before submission.

Regards,

Tran Ngoc Loan

iv

THESIS SUPERVISOR’S DECLARATION OF APPROVAL

I hereby confirm that I have supervised the undergraduate thesis of Ms. Tran

Ngoc Loan entitled: “Macro determinants on non-performing loans in Vietnam”.

The above mentioned thesis is completed and can be submitted for public

defense.

Sincerely,

Ms. Nguyen Thi My Hanh

v

TABLES OF CONTENTS

ABSTRACT.....................................................................................................................i

ACKNOWLEDGEMENT.............................................................................................ii

AUTHOR’S DECLARATION.................................................................................... iii

THESIS SUPERVISOR’S DECLARATION OF APPROVAL...............................iv

TABLES OF CONTENTS ............................................................................................v

LIST OF ABBREVIATIONS.................................................................................... viii

LIST OF TABLES ........................................................................................................ix

LIST OF FIGURE..........................................................................................................x

CHAPTER 1: INTRODUCTION.................................................................................1

1.1. Banking sector in Vietnam ....................................................................................1

1.2. Background of the study........................................................................................3

1.3. Research objectives ...............................................................................................5

1.4. Research questions.................................................................................................5

1.5. Research subjects and scope..................................................................................5

1.6. Research method....................................................................................................5

1.7. Significance of the study .......................................................................................6

1.8. Structure of the study.............................................................................................7

1.9. Conclusion .............................................................................................................8

CHAPTER 2: LITERATURE REVIEW.....................................................................9

2.1. Introduction...........................................................................................................9