Vietnam 2024 credit growth estimated at 12%, bad debt under control: brokerage

Credit growth of Vietnam’s banking system in 2024 is likely to remain the same as this year at around 12%, analysts with Vietcombank Securities (VCBS) said in a new report.

Credit demand, while affected by slow recovery of the economy and the real estate market, will be partly boosted by lower interest rates, especially within the retail and SME segments, they added.

The net interest margin (NIM) may increase slightly in 2024 as deposit costs decrease sharply. Lending interest rates will continue to be under downward pressure as banks compete to attract good quality customers.

Private banks strong in retail banking and current account savings account (CASA) have more potential for NIM expansion, the report says.

VCBS analysts expect on-balance sheet bad debt and provisioning levels in 2024 to remain under control thanks to supporting policies and customers being able to repay debts as pressures from interest costs ease.

In case the central bank’s Circular 02 on debt restructuring and rescheduling is not extended, the non-performing loan ratio of the whole industry (excluding Saigon Commercial Bank and others set for mandatory takeovers) will increase rapidly when restructured debts are due.

They also expect pre-tax profits of the banking industry as a whole to move sideways in 2023 and for further divergence in profit prospects among banking groups next year, with an overall pre-tax profit growth rate of about 10%.

Some small-sized banks will continue to record low or even negative growth next year, they note.

The analysts recommend banking stocks as a suitable investment as the industry's price-to-book (P/B) valuation is currently around 15% lower than the five-year average.

Stocks that can be considered for long-term investment are banks with good asset quality and outstanding growth rates compared to the industry average, including ACB, BID, MBB, MSB, STB, TCB, VCB and VIB.