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Private-sector banks outperformed state-owned banks amid Covid-19 crisis

Private-sector banks outperformed state-owned banks amid Covid-19 crisis

Saturday 02, 01 2021
In the context of a turbulent year of 2020 with the global crisis caused by the spread of the Covid-19 pandemic, in Vietnam, the state-owned commercial banks were outperformed by the private commercial banks in terms of the total assets, total equity, and charter capital.

Updated data from the State Bank of Vietnam showed that by the end of October 2020, the total assets of state-owned commercial banks reached VND 5.44 million.

This number represents a decrease of more than VND 41,000 billion as compared to the figure at end of September. Meanwhile, as compared to data at the end of 2019, the total assets of state-owned banks increased by only 0.06%.

On the other hand, by the end of October 2020, the total assets of private commercial banks amounted to VND5.61 million, showing an increase of more than 6,500 billion dong over the previous month. In addition, as compared to data at the end of 2019, the total assets of the private-sector banks increased by 7.68%.
the total assets of private commercial banks
In fact, the asset size of the private banking sector has exceeded that of the state-owned banking sector since the end of May 2020, and then, remained the status quo till the most recent update by the end of October 2020.

One of the important reasons for the outstanding performance of private commercial banks is that state-owned banks, which have a much bigger scale than the private-sector banks, had to struggle more to handle the situation in the context of the Covid-19 pandemic. It’s obvious that when cautiousness and safety were put in priority, state-owned commercial banks would have a harder time improving the credit growth than private commercial banks, meanwhile, credit outstanding balance is the largest component of total assets.

However, even without the outbreak of the Covid-19 pandemic and its adverse effects on the global economy, it is likely that the total assets of private banking sector will still exceed that of state-owned banking sector as small-sized banks can easily have higher credit growth than large-scale banks. Nevertheless, the spread of thecoronavirus disease has even accelerated the process.

Besides, state-owned commercial banks also face major limitations as their capital adequacy ratio (CAR) is quite low, even very low as in the case of Agribank and VietinBank, which greatly affects the credit growth space. Meanwhile, private banks are easier to receive new investment capital.

At the same time, state-owned banking sector has higher responsibility than private banking sector in supporting other economic sectors to overcome the difficulties caused by the spread of the pandemic. This has had a significant impact on the state-owned banks’ income, thereby also affecting the CAR and banks’ ability to improve their credit growth.

That the private banking sector has surpassed the state-owned banking sector in total assets shows the state-owned banks are completely outperformed by the private commercial banks because since long ago, the private banking sector has beaten its state-owned counterpart in terms of equity and charter capital.
the total equity of the private banking sector
In the most recent update, by the end of October 2020, the total equity of the private banking sector was over VND 488,000 billion, meanwhile, the same figure of the state-owned banking sector was nearly VND 420,000 billion.

Notably, the charter capital of private commercial banks is nearly double that of state-owned commercial banks, over VND 300,000 billion as compared to over VND 155,000 billion.

Source: Vietnamfinance

Categories
Banking & Finance

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