Determinants of interest rate spreads in the banking industry: an empirical study in an emerging country

Xuan Ngo, Huong Le and Linh Bui

Afro-Asian Journal of Finance and Accounting, 2025, vol. 15, issue 3, 383-405

Abstract: This study explores the factors affecting the interest rate spread (IRS) using a secondary data set collected from 27 Vietnamese commercial banks' audited financial statements. The findings indicate that the return on average assets (ROAA), operating expenses on total assets (OPERAT), and market concentration (HHI) variables all contribute significantly to the development of the IRS as assessed by IRS1 and IRS2. Specifically, ROAA and OPERAT positively correlate with both IRS1 and IRS2 at the 5% and 1% significance levels, respectively. However, an increased HHI is associated with a decreased IRS1 but an increased IRS2. Additionally, the capital on total assets (CAP) and bank size (SIZE) variables are essential only for IRS1. By contrast, the non-interest income ratio (NII) and the liquidity ratio (LIQ) have a considerably negative effect on IRS2. Regarding macroeconomic variables, GDP growth rate and inflation have a statistically significant positive effect on IRS1 but no significant effect on IRS2.

Keywords: commercial bank; banking system; interest rate spread; IRS; emerging country. (search for similar items in EconPapers)
Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.inderscience.com/link.php?id=145971 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ids:afasfa:v:15:y:2025:i:3:p:383-405

Access Statistics for this article

More articles in Afro-Asian Journal of Finance and Accounting from Inderscience Enterprises Ltd
Bibliographic data for series maintained by Sarah Parker ().