Positive outlook for Vietnamese banks, GDP growth over 6% in 2024: Fitch

Vietnamese banks are set to enjoy a favorable business environment over the next few years in tandem with a strengthening economy, a Fitch Ratings report says.

The “Vietnam Banks - Peer Review 2023” report released Thursday says “credit and liquidity risks associated with the property sector continue to recede, even if the pace of normalization remains uncertain.”

It also notes that the State Bank of Vietnam became one of the first central banks in Asia-Pacific to cut interest rates.

The shift in monetary policy as well as other decisive policy responses have helped contain downside risks for the economy and the banking sector.

As external demand recovers and domestic headwinds subside, Vietnam’s economic growth can improve to over 6.3% in 2024 and 7% in 2025, the report says.

The financial performance of banks has remained resilient in the face of several challenges. A substantial reduction in deposit and interbank rates is supporting banks’ net interest margins, Fitch says, expecting the figure to widen in 2024 as loan growth recovers.

“Rapid balance-sheet growth has long hamstrung improvements in Vietnamese banks’ capitalization, but corporate actions planned in the coming year may provide an additional lift in capital ratios.”

Non-performing loan (NPL) ratios are expected to level off in 2024 as loan growth resumes, the report says.

Fitch Ratings has given a long-term issuer default rating (IDR) of “BB/Positive” to three state-owned or state-controlled banks - Vietcombank, Agribank, and VietinBank. Additionally, Vietcombank has received a Viability Rating (VR) of “bb-,” while the two other banks obtained “b” ratings.

Among private banks, ACB has received a “BB-/Stable” rating for long-term IDR and a “bb-” rating for VR, while MBBank’s corresponding ratings were “BB-/Positive” and “b+.”