In its recent report on banking industry, VNDirect Securities Joint Stock Company said that a sharp increase of 2 percentage points in operating interest rates by the State Bank of Vietnam (SBV) will negatively affect banks' NIM when capital costs increase and lending rates can hardly keep up.
Besides, the real estate market and corporate bonds continue to face difficulties, which will negatively affect the asset quality as well as the liquidity of banks. In addition, capital raising will again be a notable topic this year, especially for state-owned banks.
Overall, profit growth of the banking system is forecast to decelerate to 10-11% y/y in 2023-2024 (from 32% y/y in 2022) due to slower credit growth, narrowing NIM and rising credit costs.
Credit growth is forecast to slow down and reach about 12% in 2023 due to the weakened real estate market, decelerating export growth and high interest rates. Investors will find it difficult to mobilize capital when the corporate bond market is quiet and interest rates are high, affecting the demand for home loans.
Exports, one of Vietnam's main growth drivers, will decelerate and are estimated to reach 9.5% in 2023. Moreover, enterprises will temporarily stop expanding production and business activities in the context of high interest rates and weak consumer demand.
In addition, inflation is expected to remain high even though global inflation has shown signs of peaking. Experts believe that inflation in Vietnam can still remain high due to a 20.8% increase in wages, effective from July 2023, and an increase in prices in services such as healthcare, public transport, etc.
On top of that, liquidity stress is also a cause of slowing down credit growth. At the end of the third quarter of 2022, all banks recorded a strong increase in LDR, some banks were close to the prescribed level (85%).
According to VNDirect, the State Bank will continue to tighten monetary policy in 2023-2024 in the context of macro-economic fluctuations, the real estate and corporate bond markets facing many difficulties, and the "hawkish" policy of the FED exerting pressure on exchange rates and interest rates, and inflationary pressures.
Along with liquidity stress, the banking industry will face rising capital costs in 2023. Interbank interest rates have increased sharply in recent months due to the SBV's withdrawal of dong from the system to balance the exchange rate, corporate buying back bonds ahead of time, and events related to SCB. Although it has cooled down, interbank interest rates are forecasted to continue to be around 5-6% for overnight term.
Regarding the deposit interest rate, after the State Bank had raised the operating interest rate, commercial banks quickly raised the deposit interest rate in all terms. In 2023, when the capital cost of the banking industry will increase sharply, the NIM of banks will also shrink.
Experts believe that asset yield is unlikely to increase strongly enough to compensate because lending rates are unlikely to increase sharply when the government is calling for interest rate cuts to share the burden with customers.
Accordingly, banks with a high proportion of retail lending and high CASA ratio will be able to cope with the narrowing of NIM. Currently, VIB and ACB are the two banks with the highest retail proportion in VNDirect's watchlist at 87% and 64%, respectively. VietinBank, VPBank, TPBank, and MB are also notable names that have succeeded in increasing the proportion of retail loans this year.
In terms of CASA, Techcombank, MB and Vietcombank are the banks with the best CASA ratio in the system. Vietcombank is especially impressive when it is one of the few banks to improve the CASA ratio since the beginning of the year, with the main driving force coming from the "zero-fee" policy that the bank has implemented since the beginning of 2022.
Compiled by VietnamCredit