Vietcombank has risen to regain the top position from VPBank

Double-digit growth in profit

Currently, a number of banks have started to announce business results for the first nine months of 2022, in which, many banks recorded double-digit growth compared to the same period last year.

For example, TPBank announced 9 months of 2022 business results with accumulated pre-tax profit of VND5,926 billion, up 35% over the same period last year and fulfilled 72% of the full-year profit plan.

VIB also announced preliminary business results with 9 months' pre-tax profit of VND7,800 billion, up 46% over the same period last year. Sacombank recorded a profit in the third quarter of 2022 reaching VND1,532 billion, up 86% over the same period last year. Accumulated in the first 9 months of the year, pre-tax profit reached VND4,440 billion, completing 84.1% of the plan, of which the proportion of non-interest income was 39.4%.

SSI Securities Analysis Center (SSI Research) has just reported estimated business results in the third quarter of 2022 of 26 listed companies in the research scope. SSI's analysis team forecasted that banking group profits would still grow strongly in the third quarter despite rising interest rates putting pressure on net interest margin (NIM).

Specifically, SSI Research forecasted that Vietcombank's profit in the third quarter of 2022 would reach VND7,400-7,600 billion, up 29-33% over the same period due to the growth of credit outstanding and deposit balance; BIDV reached about VND6,000 billion, up 120%. Techcombank's pre-tax profit increased by about 20-25% despite the pressure of increasing capital costs and less diversified income sources compared to previous periods.

SSI believed that VPBank could record a pre-tax profit of VND4,200-4,500 billion in the third quarter of 2022, up 55-65% over the same period last year. VPBank's growth was driven by the improved NIM of the parent bank and controlled credit quality. SSI Research expected MB's 9-month pre-tax profit to reach about VND18,000-18,500 billion, an increase of 50-60% over the same period.

The results of the survey on business trends in the fourth quarter of 2022 of credit institutions conducted by the Department of Forecasting and Statistics (the State Bank of Vietnam) showed that most banks still expected profits to improve in this year.

Accordingly, 70.4-75.9% of credit institutions expected their business to improve in the fourth quarter of 2022. Profit pre-tax in 2022 was expected to grow positively by 88.3% of credit institutions compared to 2021.

Mr. Nguyen Quoc Hung, General Secretary of the Vietnam Banks Association said that, through discussions with leaders of credit institutions, the performance results of the third quarter of 2022 were good. According to Mr. Hung, this was a good sign in the context that deposit interest rates had increased since the beginning of the third quarter while lending rates had barely adjusted and the increase was not much compared to the growth rate of deposit rates. The reason was that banks expanded many other service activities, contributing to the growth of profits.

He also analyzed, according to the data of the State Bank, as of June 30, 2022, the total assets of the entire system of credit institutions reached VND17 quadrillion and the outstanding credit balance reached over VND12 quadrillion. Therefore, the current profit rate of credit institutions was normal, not sudden.

Are interest rates hindering growth?

Despite the positive growth in the past 9 months, according to experts, the profit of the banking industry in 2022 and 2023 will be difficult to maintain high growth like in the period of 2020 and 2021.

The reason is room of credit growth is not much when credit will still aim to increase 14%/year.

Meanwhile, NIM is under pressure because input interest rates tend to increase, but lending interest rates are difficult to increase accordingly. Moreover, from the beginning of October this year, the reduction of the ceiling on the ratio of short-term capital for medium and long-term loans from 37% to 34% may also increase the cost of capital of banks because of the need to increase long-term deposits making higher capital costs.

In addition, from the second quarter of 2022, the current account savings account ratio (CASA) at many banks decreased because the cash flow from the current account tends to switch to the term savings channel to enjoy high interest rates, because investment channels such as securities and real estate slowed down. This may cause banks' net interest income to shrink, which is the main source of profits impacted. Moreover, a large amount of capital of banks is "stuck" in bad debt, including restructuring debt, making a large amount of credit unable to be brought to the economy.

Therefore, the advantage for growth is in favor of banks that have been granted additional credit room in the last period, along with that, banks promoted non-interest income sources. According to a report by Agribank Securities Company (Agriseco Research), to achieve the plan set out at the beginning of the year, banks might have their own solutions such as restructuring credit capital (accelerating capital turnover, increase debt collection) and increasing non-interest income. The retail focus will continue to be the spearhead in 2022 to help banks reduce risks. The insurance cross-selling market is forecast to continue to be active and is an important driver in speeding up banks' profitability.

At the same time, banks that have gone ahead and boldly digitized have better business results than banks that have not invested in digitization.

According to Mr. Nguyen Quoc Hung, with the promotion of digitization, some banks recorded a CASA rate of up to 40-50%. Such a high ratio would create financial strength for credit institutions and guarantee profits.