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Forecast: Banking industry profits to increase by only 5.2%

Forecast: Banking industry profits to increase by only 5.2%

Monday 23, 10 2023
BVSC forecasts that bank profit growth in 2023 will only reach 5.2% due to facing many difficulties. However, bank stocks are being valued at record lows, which is a good opportunity for long-term holding.

Slow credit growth

According to the latest report of Bao Viet Securities Joint Stock Company (BVSC), the banking industry's profits in the third quarter and the whole year 2023 are forecast to be lower than in previous years.

Analysts expect bank profit growth

Analysts expect bank profit growth (group of stocks analyzed by BVSC) compared to the same period last year to reach 8% in the third quarter, 5.5% in the last two quarters of the year and 5.2% for the whole year 2023. In 2024, the profits of this industry can flourish, estimated to reach 18.9% when the economy begins to recover.

Previously, many securities companies such as VDSC, ACBS, TPS have forecast that banking industry profits in 2023 will increase by about 10% compared to 2022, corresponding to credit growth of 10 - 12%. Thus, BVSC's expected growth figure is only about half of previous forecasts.

The decline in profits is explained by reasons such as low credit growth, narrowing net interest margin (NIM), or pressure on provisioning.

As of September 29, credit growth had reached 6.92% compared to the end of last year, inching up 1.36 percentage points in less than half a month. Slow credit growth is explained by the difficult economy, weak real estate market, decelerating production activities as well as high interest rates, reducing credit demand.

Credit growth

BVSC experts said that deposit interest rates are decreasing very rapidly and are expected to gradually reduce lending interest rates along with the economy being able to recover better in the second half of 2023.

"BVSC expects credit growth for the entire industry to be about 12-13% in 2023 and around 13% in 2024," the report wrote.

According to the results of a survey on business trends of credit institutions in the fourth quarter of 2023 conducted by the State Bank, credit institutions expect outstanding loans of the entire banking system to increase by 4.6% in the fourth quarter and increase by 12.3% for 2023.

Bank stocks are being valued at record lows

However, from an investment perspective, BVSC believes that banking industry stocks are being valued at a record low. The P/B level (price/book value ratio) of many banks is at the lowest level since 2016, which is a good opportunity for long-term holding.

BVSC recommends that investors accumulate bank stocks when there is a discount and set long-term goals. The risks to the banking industry pointed out by analysts are the rapid increase in bad debt and the risk of the economy recovering more slowly than expected.

Sharing the same opinion, KB Securities (KBSV) also recently commented on banking stocks that "challenges are still there, but there will still be attractive opportunities".

KB Securities

KBSV highly appreciates the long-term prospects of the banking industry, with some prominent names such as Vietcombank, ACB and Sacombank. After the recent adjustment, some stocks such as Vietcombank, ACB, BIDV and Vietinbank have had deeper discounts. P/B of the entire industry is equivalent to the period of 2016, when the real estate market gradually recovered.

Source: BVSC, KBSV

Compiled by VietnamCredit

Banking & Finance

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