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15(1)2025

Digitalization and its impact on commercial banks’ profitability in Vietnam


Author - Affiliation:
Huong Mai Nguyen - National Economics University, Hanoi , Vietnam
Huyen Thi Ngoc Pham - National Economics University, Hanoi , Vietnam
Khue Minh Tran - National Economics University, Hanoi , Vietnam
Mai Thi Tuyet Nguyen - National Economics University, Hanoi , Vietnam
Yen Thi Hai Nguyen - National Economics University, Hanoi , Vietnam
Corresponding author: Huong Mai Nguyen - nguyendusan68@gmail.com
Submitted: 04-03-2024
Accepted: 26-05-2024
Published: 17-09-2024

Abstract
Amid the rapid development of the digital economy in Vietnam, traditional industries, including commercial banking, must recognize digitalization as both a prevailing trend and an essential requirement for sustainable development. This study utilizes the Feasible Generalized Least Squares (FGLS) regression method to examine the impact of digitalization on the profitability of Vietnamese commercial banks from 2013 to 2022. Profitability is measured by Return on Assets (ROA), while the digitalization level is represented by the ICT Index (Information and Communication Technology Development and Application Readiness Index). The model also incorporates two control variables: Credit Risk and Solvency. The findings demonstrate that digitalization has improved profitability in commercial banks. Additionally, credit risk is found to have a negative impact on the profitability (ROA) of commercial banks, while the solvency ratio shows the opposite. Based on these results, the authors propose recommendations to enhance the digitization process and consequently elevate operational efficiency and profitability in Vietnamese commercial banks.

JEL codes
G21; O33; G14

Keywords
commercial banks; digitalization; ICT index; profitability; Vietnam

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Cite this paper as:

Nguyen, H. M., Pham, H. T. N., Tran, K. M., Nguyen, M. T. T., & Nguyen, Y. T. H. (2025). Digitalization and its impact on commercial banks’ profitability in Vietnam. Ho Chi Minh City Open University Journal of Science – Economics and Business Administration, 15(1), 152-164. doi:10.46223/HCMCOUJS.econ.en.15.1.3281.2025


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DOI: https://doi.org/10.46223/HCMCOUJS.econ.en.15.1.3281.2025
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