The Impact of Digital Banking on the Performance of Commercial Banks in Vietnam by Using the CAMELS Ratio Framework

Abstract: Vietnam has 31 banks, in which there are more than 27 banks with audited annual published financial statements. Up to the present time (2023), there have been 06 banks converted on the banking application into digital banking, the remaining banks are still electronic banks (EBanking). The financial ratios in this study including: Capital Adequacy, Asset Quality, Management Efficiency, Earnings, Liquidity, and Market Risk Sensitivity which are collectively known as CAMELS rates and digital banking adoption. This study aims to evaluate the performance of the banking sector and the impact of digital transformation on the performance of commercial banks in Vietnam in terms of Efficiency and empirical significance in terms of Panel regression mode. Therefore, pooled data of 28 the banks operating in Vietnam from 2007 to 2022 have been employed. Methods used in the study are the panel data regression methods including fixed effect model, random effect model then use Hausman test, autocorrelation test to select the best model. The results of this model are intended to help banks identify the factors that affect their performance and devise strategies to apply digital banking that are appropriate for their banks.

Keywords: CAMELS model, digital banking, listed commercial banks, Vietnam