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Banking sector: Positive signals from the figures


In the context of declining revenue and profitability of many sectors due to the impact of acute respiratory infection caused by new strain of coronavirus (Covid-19), the figures of the banking sector still show impressive growth.

According to the newly released report of FiinGroup (FiinGroup), in 2019, the group of 18 listed banks accounted for 67.4% of the total outstanding loans of the whole banking sector with a credit growth of 15.5%, higher than that of the whole banking sector (13.5%).

Aggregate data of FiinGroup shows that 18 listed banks recorded an after-tax profit growth of 29.3% in 2019. Profit growth mainly came from the improvement of net interest margin (NIM) of 30 basis points to 3.4 percent from 3.1 percent in 2018. NIM improvement of banks is mainly due to retail credit growth, including consumer lending in some banks through their subsidiaries.

At the same time, business loan growth tended to decrease and was only at 7.8% in 2018. Although personal loan growth also tended to decrease, it was still at 23.3% in 2018. Besides, service fee collection of banks grew strongly. The three major banks with state capital also experienced strong growth in fee income. Meanwhile, other activities including investment, securities trading (mainly government bonds), foreign exchange trading, gold and dividend income only grew by 5.4% in 2019. 

Also according to FiinGroup, the banking sector has basically dealt with bad debts since the previous crisis period. Accordingly, the NPL ratio of the 18 listed banks has been controlled to 2.82 percent - this is the lowest rate in the last five years. Moreover, by the end of the fourth quarter of 2019, only 7/18 listed banks have not yet settled bonds at the Vietnam Asset Management Company (VAMC) with a total outstanding loans of over VND 6.3 trillion, of which Eximbank (EIB) accounted for 70 percent. The data analysis team of FiinGroup said that this is a good signal for the whole banking sector when asset quality is getting better.

Regarding the banking sector, Bank for Investment and Development of Vietnam Securities Joint Stock Company (BSC) forecasts that credit growth in 2020 will be 12.5%, lower than the estimated rate of more than 13% in 2019. The reasons given by BSC are: GDP growth, the demand for long-term loans for production and business has been slowed down; tighten controls over credit of banks lacking capital, etc.

Along with that, according to BSC, NIM of the whole banking sector in 2020 is forecast to improve slightly because lending and mobilizing interest rates will continue to slightly decrease to support overall growth of the market. At the same time, restructuring loans to SMEs and individuals will also improve NIM. As estimated by BSC, NIM of the whole sector would grow slightly to 3.64%.

In 2020, BSC experts believe that the quality of assets of banks will be improved. This will come from the low level of credit growth which helps banks select safe loans; at the same time, control and restrict lending to risky sectors such as real estate, manufacturing, businesses making losses.

Also in 2020, banks will deal aggressively with bad debts , ensuring safety for the system. At present, many banks have successfully completed bad debt settlement through VAMC and most of listed banks have successfully applied Basel II, which helps gear towards stable operations and low risks, improving the bank's capacity.

In addition, the asset quality of banks has improved thanks to the regulation on reducing the ratio of short-term capital for medium and long-term loans to 40% by October 2020 and gradually to 30% in 2022.


Kylie Nguyen

© 2019 Vietnam Bank for Agriculture and Rural Development No. 2 Lang Ha street, Ba Dinh district, Hanoi, Vietnam
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