The impact of liquidity on profitability – evidence of Vietnamese listed commercial banks

• Published in: Banks and bank systems 2022-03, Vol.17 (1), p.94-103
• Main Authors: Quoc Thinh, Tran, Xuan Thuy, Le, Anh Tuan, Dang
• Format: Article
• Language: English
• Subjects: bank performance; Banking; Commercial banks; economic growth; Liquidity; monetary policy; net interest margin; return on assets; return on equity
• ISSN: 1816-7403; 1991-7074
• DOI: 10.21511/bbs.17(1).2022.08

Profitability is a matter of concern for all economic organizations, including banks. The economic problem always poses for banks in maintaining growth and ensuring sustainable stability. Liquidity is always a concern of banks in maintaining profitability. The article aims to test the relationship between liquidity and profitability of Vietnamese listed banks. Data include 18 Vietnamese listed commercial banks for a period of 9 years from 2011 to 2019. The article uses the time series method with the ordinary least square. The results show that liquidity has a positive relationship with the profitability of listed banks including return on assets, return on equity, and net interest margin. As for net interest margin, the liquidity ratio of loans to deposit plus short-term borrowings and short-term bills payable has the opposite effect. To contribute to the stable and sustainable growth of the banking system, the article proposes the policies for the Vietnamese banking system by fully implementing the regulations on liquidity based on the Bank for International Settlements and should forecast the financial developments in the region and the world to have flexible responses to avoid uncertainties, as well as the need to form and maintain funds to timely support for liquidity in the entire banking system.