In the first half of 2022, the profit of several banks in Vietnam increased by 20-30%. One announced triple profit growth compared to the same period in 2021.
The State Bank's Forecast and Statistics Department has announced some key results in the survey on business trends of credit institutions in the third quarter of 2022.
As expected in previous surveys, credit institutions assessed business activities in the second quarter of 2022 have grown much better over the first quarter. In the third quarter, 54.6% of the credit institutions anticipate their business results to improve slightly compared to the second quarter. 38.9% expected an unchanged result, while 6.5% worried the profit might decline.
In 2022, 87.7% of credit institutions expected pre-tax profit to grow positively compared to 2021. 8.5% of credit institutions expect negative profit growth in 2022 (up from the rate of 5.8% in the March 2022 survey), and 3.8% estimated profit unchanged.
The growth driver of banks in the first half of this year was retail credit, especially home loans. According to Vietcombank Securities Company (VCBS), the proportion of retail credit of listed banks has increased from 31% in 2015 to 45% of total outstanding loans at the end of the first quarter of 2022. Home loans, car purchases, and consumer finance products recorded positive increases.
The growth prospects in the last 6 months of the year depend much on the credit room that the State Bank will grant in the coming time. VCBS forecasted that the State Bank would grant credit room to banks at the beginning of the third quarter of 2022, while Yuanta Securities expected the granting would be put off to August when the economy had achieved good growth in the second quarter.
However, banks with high capital adequacy ratio (CAR), low bad debt, good risk management model (compliance with Basel II, Basel III, IFRS 9 standards, etc.), and banks responsible for supporting the economy, such as Vietcombank, Techcombank, VPBank, MB, ACB, TPBank, MSB, etc., are expected to be granted a high credit limit.
In contrast, banks with strong lending to real estate and investing in corporate bonds in the past months may have limited credit growth room at a moderate level.
In addition to the credit room, the factor affecting the bank's profit in the second half of 2022 is the interest rate. Currently, 4 state-owned commercial banks still maintain the same deposit interest rate, and the remaining private commercial banks have increased deposit rates. Meanwhile, lending interest rates cannot increase immediately; there is a certain delay. That will put banks' net interest margin (NIM) in the second half of 2022 at risk of falling, except for a few banks that can maintain a high CASA ratio.
Non-interest income increased to account for an average of 27% in the income structure of banks, with the main contribution from service income also helping banks to grow profits positively.
Bad debt is considered a factor that may impact bank profits significantly in the second half of 2022. Currently, the State Bank is discussing whether to continue to extend Circular 14/2021/TT-NHNN (Circular 14) on debt structure. Circular 14 expires at the end of June 2022. If not extended, the bad debts of banks will increase. However, in the past time, joint-stock commercial banks have increased provision for structural debts. With that, even if Circular 14 is not extended, the pressure on banks' provisioning will not be too great.
The status of real estate companies will also impact the banking industry. Data from FiinGroup as of the end of April shows that the total outstanding loans of real estate reached more than 2,288 million billion VND, accounting for more than 20% of the total outstanding loans of the economy, of which bad debts accounted for 1.62%. The real estate industry faces many obstacles now and there will be more in the coming time, which will create more challenges for banks' profit growth and debt quality.
In general, the bank will still maintain an optimistic profit growth this year. However, in 2023, there will be a clear divergence in profit prospects among banks.
Compiled by VietnamCredit