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The business performance of Vietnam’s commercial banks

In this paper, the authors employ multiple methods to evaluate the business performance of Vietnam’s commercial banks and extend some suggestions for applying analyzing methods and improving their performance. | 42 |Nguyễn Thị Loan & Trần Thị Ngọc Hạnh| 42– 62 The Business Performance of Vietnam’s Commercial Banks NGUYỄN THỊ LOAN Banking Uninversity Email: loan.dhnh@gmail.com TRẦN THỊ NGỌC HẠNH Eximbank Email: tranngochanh0405@gmail.com ARTICLE INFO Received: March 19, 2013 Received in revised form March 29, 2013 Accepted: June 15, 2013 Keywords: business performance efficiency commercial banks ABSTRACT Analyzing the business performance or efficiency of commercial banks plays an important role in enabling bank executives to make organizational decision and policies that may facilitate the profitability and enhance the bank’s performance. In this paper, the authors employ multiple methods to evaluate the business performance of Vietnam’s commercial banks and extend some suggestions for applying analyzing methods and improving their performance. The Business Performance of Vietnam’s Commercial Banks JED No.217 July 2013| 43 1. INTRODUCTION The business performance or efficiency is one of the top issues of bank executives because it is directly related to the sustainable profit and the banking efficiency, and ensures the bank competitiveness in the context of the international economic integration. Analyzing the business performance has been regularly and periodically conducted by Vietnam’s commercial banks, which is mainly based on indices. Thus, in this paper, besides the financial index-based analytical method, factor analysis is also employed to estimate the business performance of Vietnam’s commercial banks; and suggestions for perfecting and enhancing it are extended. 2. THEORETICAL BACKGROUND According to ECB (European Central Bank, 2010), the business performance is the ability to generate sustained profit. First of all, profit will be transferred to the contingency fund for unexpected losses, consolidating the capital position and then is used for improving future profit via investments extracted from retained profit. The concept of “business performance”