The report of Rong Viet Securities Company (VDSC) estimates that, in the first quarter, the average growth in total net interest income of banks was 21%, total operating income increased by 36% and pre-tax profit growth reached 70%. In particular, VPBank announced abnormal growth in profit thanks to the bancassurance prepaid fee.
Growth of income components shows a large contribution of non-interest income, operating optimization and credit costs. Net interest income grew strongly at large private banks due to high credit growth compared to the beginning of the year and the continued disparity between credit expansion and deposits.
Large private banks have added a substantial amount of corporate bonds. Techcombank, VPBank and TPBank have increased their corporate bond balances by VND 38 trillion. In 2021, the total amount of corporate bonds held in the banking system was VND 274 trillion. The increase in corporate bond balances of these three banks is equivalent to 14% of the total corporate bond outstanding of the whole banking industry.
According to VDSC, this may cause some concern due to recent events related to corporate bonds and real estate. Banks are closely monitored by the SBV in terms of corporate bond issuance and real estate lending. The portfolio of underwriting and advisory bonds has slowed down at some of the top investment banks. Credit lines for corporate loans in the real estate sector have been limited.
However, the report still shows the industry's sustainable credit growth, with the highest growth rate since the dawn of the pandemic. Strong growth came from both short-term and long-term loans, of which home and auto loans had significant contribution. This shows that disbursement is still taking place normally in most banks. However, the credit policy may be changed to be retail oriented and lending to businesses not for the purpose of real estate business.
In the 2022 Strategy Report, VDSC forecasts that the growth rate among banks will continue to differentiate strongly in 2022 and the advantage will be in favor of large banks. This is partly reflected in the first quarter’s business results in which the leading private banks grew as expected while smaller ones posted negative growth.
On a year-on-year basis, the high credit growth limit in 2021 and the strong credit expansion in the first quarter of 2022 have brought about good credit growth at large private banks, supporting net interest income. Despite the recovery, deposit growth of these big banks is still slower than credit expansion. This has also supported NIM.
The disparity in profit growth among banks is forecast to continue for the rest of the year when the industry benefits from a low comparability background and rising credit growth limit in the second half of 2022.
The first three months of the year also recorded an increase in deposit interest rates listed at private banks. This is reflected in the increase in average deposit interest rates compared to the fourth quarter of 2021. Meanwhile, state-owned banks have maintained the same interest rates since mid-2021. Private banks have been more active in attracting deposits due to their smaller size. The pace of interest rate hikes has slowed recently, but it is likely that momentum will return in the second half of 2022.
Compiled by VietnamCredit