THE CAUSAL RELATIONSHIP BETWEEN INCOME IVERSIFICATION AND PROFIT OF VIETNAMESE COMMERCIAL BANKS

Abstract

Studying the causal relationship between income diversification and bank profits with data including 32 Vietnamese commercial banks, period 2007-2022. The author uses the PVAR estimation method and Granger test to estimate this causal relationship. The research results show a causal relationship between income diversification and bank profits. In addition, specific factors such as scale, equity, deposits, and macroeconomic factors also affect this causal relationship. The higher the diversification, the higher the profit, and vice versa, the higher the profit is the reason to strongly promote bank diversification activities. However, when considering risks, the higher the diversification, the lower the banks' profit. This empirical evidence is the basis for suggesting some policies for bank managers, investors, and policy makers.