  Credit risk is a crucial topic in the field of financial stability,
especially at this time given the profound impact of the ongoing pandemic on
the world economy. This study provides insight into the impact of credit risk
on the financial performance of 26 commercial banks in Vietnam for the period
from 2006 to 2016. The financial performance of commercial banks is measured by
return on assets (ROA), return on equity (ROE), and Net interest margin (NIM);
credit risk is measured by the Non-performing loan ratio (NPLR); control
variables are measured by bank-specific characteristics, including bank size
(SIZE), loan loss provision ratio (LLPR), and capital adequacy ratio (CAR), and
macroeconomic factors such as annual gross domestic product (GDP) growth and
annual inflation rate (INF). The assumption tests show that models have
autocorrelation, non-constant variance, and endogeneity. Hence, a dynamic
Difference Generalized Method of Moments (dynamic Difference GMM) approach is
employed to thoroughly address these problems. The empirical results show that
the financial performance of commercial banks measured by ROE and NIM persists
from one year to the next. Furthermore, SIZE and NPLR variables have a
significant negative effect on ROA and ROE but not on NIM. There is no evidence
found in support of the LLPR and CAR variables on models. The effect of GDP
growth is statistically significant and positive on ROA, ROE, and NIM, whereas
the INF is only found to have a significant positive impact on ROA and NIM.
