The digital transformation will help banks solve many difficulties in 2023. Photo: H.Dieu

Suffering from difficulties

Experts from VNDirect Securities Company said that the tensions in the corporate bond and real estate markets would negatively affect the quality and liquidity of banks. Accordingly, about VND46 trillion of corporate bonds will be matured in the first six months of 2023, which will be a big challenge for the financial system. Moreover, corporate bond banks will be negatively affected as credit risk increases, and income from fees falls.

According to experts' analysis, although there are no official regulations or documents related to the tightening of credit flows into the real estate market by the State Bank of Vietnam (SBV), real estate lending has been slowed down to restrain the hot growth of this market since 2022.

In addition, real estate has a high-interest rate of 200% compared to other fields, so banks have limit ed lending to this sector to ensure the safety of capital and the quality of their assets.

Similarly, in the newly released strategy report, Viet Rong Securities Company (VDSC) said that the banking sector would continue to overcome difficulties in the downtrend of the real estate cycle and the less positive prospect of export and import. Accordingly, the interest income of the banking sector will slow down due to the impact of credit growth along with a decrease in the Net interest margin (NIM) in 2023. As a result, credit growth is expected from 11-12%, lower than the target of 15.5-16% in 2022.

Moreover, it is forecasted that the SBV will continue to tighten monetary policy in 2023, and the banking sector will face increased capital costs. In addition, asset quality will be an issue the year, especially as businesses will continue to face difficulties and high-interest costs due to the appreciation of the USD and rising interest rates, affecting the debt repayment capacity of enterprises. This may lead to an increase in provision costs in 2023-2024.

Seeking opportunities in difficulties

Mr Nguyen Quoc Hung, General Secretary of the Vietnam Banks Association (VNBA), said that a proposal was made to the SBV to consider allocating targets and credit room from the beginning of the year for banks to develop business plans through the annual general meeting of shareholders in April.

The SBV will consider the specific credit room. However, the VNBA's General Secretary said that banks with a healthy credit structure restructured weak banks, good asset quality, high capital adequacy ratio and good risk management may be granted a higher credit limit .

Similarly, Dr Nguyen Tri Hieu, a finance-banking expert, said that the credit growth and the plan of the banking system should be announced soon. This not only helps commercial banks have an operation plan, but even production and business enterprises may implement production and business activities when capital is guaranteed.

Banks should seek solutions to face the rising cost of capital. According to experts, banks with a high proportion of retail loans and Current Account Savings Account (CASA) may resist shrinking NIM.

Currently, Vietnam Technological and Commercial Joint Stock Bank (Techcombank), Military Commercial Joint Stock Bank (MB) and Bank for Foreign Trade of Vietnam (Vietcombank) are the banks with the best CASA ratio in the system.

According to banks, increasing capital is an urgent need to help banks manage risks and capital more effectively because the capital buffer of the Vietnamese banking sector is still lower than international standards.

According to Mr Pham Duc An, Chairman of the Board of Directors of the Bank for Agriculture and Rural Development (Agribank), the provision of charter capital for Agribank is very urgent for the bank to ensure the minimum capital adequacy ratio for credit growth from the beginning of 2023, serving the capital needs of the economy.

Vietcombank's leaders prioritise increasing charter capital for state-owned commercial banks in the context that the scale of charter capital and capital adequacy ratios of banks are still low compared to development needs and international standards.

On the other hand, with the support from the macro-economy, experts say that the banking sector will find "opportunities in difficulties". According to VNDirect experts, the banking sector's business results will be more stable in the second half of 2023 when interest rate and exchange rate pressures ease, and liquidity is improved thanks to the promotion of the State's public investment packages.

Some experts also said that the impact on banks is different, depending on the size and response level of each bank, in which those with good reserve buffers, effective digital transformation will have more advantages.