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ABSTRACT
1. Reason for choosing a topic
The trend of international integration has brought about great opportunities
and challenges for the economy in general and the banking and finance sector in
particular. Vietnam's commercial banks face competition pressure as the penetration
of international banks and financial institutions surpasses technology, finance and
service quality,…Therefore, it is essential that commercial banks in Vietnam
innovate in order to maintain and develop in this competitive environment.
Most of the income of commercial banks was mainly from credit activities
before. According to Cafe, banks' long-term profits still depend on credit, including
big banks like BIDV, Vietinbank or Vietcombank. For small banks, interest from
credit activities account for from 80% to 90%. Credit activities, however, is often
more risky than other products and services of the bank. Moreover, credit activities
are controlled by the legal corridor of the State, so the business activities of
commercial banks in Vietnam experience many difficulties. As a result, commercial
banks have shifted towards developing noninterest services in order to achieve more
sustainable and less risky income. As a matter of fact, nowadays, foreign banks tend
to focus on developing noninterest services to boost the performance more
effectively.
However, in reality, noninterest services from commercial banks in Vietnam
are still monotonous in terms of form, low quality and small size leading to low
efficiency and limited competitiveness. Therefore, understanding the impact of
noninterest growth on banking performance and developing noninterest activities is
an important step than ever. From these theoretical and practical issues, I chose the
topic "The effect of noninterest growth on efficiency in commercial banks in
Vietnam" to study.
