FINANCIAL PERFORMANCE OF COMMERCIAL BANKS: A CASE STUDY OF BAC A BANK

Abstract

This study assesses the financial performance of Bac A Commercial Joint Stock Bank (Bac A Bank) from 2016 to 2024 using ROA, ROE, and CIR indicators, while analyzing the dynamic relationship between internal factors, including service income, operating expenses, and the non-performing loan ratio. Employing a Vector Autoregression (VAR) model with quarterly data, the research examines causal relationships and measures variable responses through Impulse Response Functions (IRF) and Forecast Error Variance Decomposition (FEVD). The findings show that service income positively impacts ROA within the first 1–2 quarters and enhances cost efficiency by lowering the CIR. Conversely, operating expenses exert a significant negative effect on both ROA and ROE, while simultaneously increasing the CIR and NPL ratio in the short run. The NPL ratio also demonstrates a detrimental impact on profitability. Furthermore, variance decomposition results reveal that the CIR and operating expenses play a crucial role in explaining fluctuations in financial performance, whereas the impact of service income is characterized by stability and spillover effects. These findings suggest key policy implications for Bac A Bank regarding the expansion of non-credit services, cost control, and credit quality enhancement to achieve sustainable financial performance.