Strong economic recovery post pandemic buoys Vietnam banks

A State Bank of Vietnam survey has found commercial banks upbeat about profit and credit growth for the third quarter and the year as a whole.

A survey report said 54.6%, 38.9% and 6.5% of credit institutions expected Q3 performance to improve slightly, remain stable and decrease slightly, respectively.

For the whole year, 87.7%, 8.5% and 3.8% of the respondents projected positive, negative and zero growth in pre-tax profit.

The survey also found that credit institutions expected demand for credit would grow higher than deposit and payment demands. They estimated the banking system's outstanding loans would expand an average 4.1% in Q3 and 15% in 2022.

Both loan and deposit interest rates were projected to increase slightly in Q3 and 2022 due to inflation pressure and the global trend of higher interest rates. Bad debt was expected to decrease in Q3.

Many commercial banks in Vietnam recorded higher year-on-year profits in Q2 and the first half of the year and were optimistic that credit and profit would continue growing in Q3, the report said.

VietcomBank, the biggest listed bank in Vietnam by market capitalization, recorded a 30% growth in profit in the first five months. The bank, listed on the Ho Chi Minh Stock Exchange (HoSE) as VCB, attributed the achievements to credit growth and strong increase in current account savings account (CASA) as it tried not to hike interest rates during the pandemic.

Private lender Eximbank (HoSE: EIB) estimated its pre-tax profit to increase 170% year-on-year to VND1.8 trillion ($77 million) in H1/2022, with pre-tax profit in Q2/2022 tripling year-on-year.

Banks attributed their positive results to the country’s strong post-pandemic economic recovery, reflected in a decade-high GDP growth of 7.72% in Q2, strong credit growth, improvements in non-interest income, and lower risk provision pressures.

As of June 30, the economy's credit had grown 9.35% to VND11,400 trillion ($488 billion), State Bank data shows.

Yuanta Securities Vietnam estimated that after-tax profits of 27 listed banks would jump 36% year-on-year in Q2. Interest income and fee income were projected to grow 14% and 5% in the period, respectively. However, bancassurance revenues may not see optimistic figures.

Vietcombank Securities Company (VCBS) said it expected the central bank to lift the credit growth cap for banks at the beginning of Q3/2022, while Yuanta expected such a move in August.

It is expected that similar to previous years, banks with strong management like VCB, MBBank (HoSE: MBB) and Techcombank (HoSE: TCB) would enjoy a high credit growth cap, while it would be lower for banks with heavy loans in properties and corporate bonds.

Other factors affecting banks’ profits for the remaining months of the year include interest rates, bad debt and non-interest incomes.