Banks actively provide capital for enterprises to restore production. Photo: Internet

Diversifying sources of revenue

In the first months of 2022, many banks have made moves to "tighten" the disbursement of real estate loans and corporate bonds in the face of risks from the market and warnings from management agencies.

In mid-March, the State Bank of Vietnam (SBV) issued an action plan for the banking sector to implement Resolution No. 11/NQ-CP dated January 30, 2022 of the Government.

Accordingly, the State Bank would administer credit to promptly meet capital for production and business, strictly control credit for potentially risky fields such as real estate and securities and remove difficulties, support customers affected by the Covid-19 pandemic.

Along with that, the SBV also sent official dispatches asking credit institutions to strictly control the growth rate of credit balance and credit quality.

The proof is that banks with high profits in the first quarter of 2022 all have revenue from non-credit sectors.

Recently, SSI Securities Company published a report on the business results of 13 banks listed on the stock exchange. Twelve of 13 banks were forecast to see positive profit growth including ACB, BIDV, HDBank, MB, MSB, Sacombank, Techcombank, TPBank, Vietcombank, VIB and VPBank. Only VietinBank was forecast to witness negative profit growth compared with the high base of the first quarter of 2021.

In which, VPBank was the "champion" in profit with an estimate of about VND11,000 billion, up 175% over the same period last year thanks to fully recording prepaid fees from bancassurance contracts (distribution of insurance through banking channels) with AIA. In addition, the bank also had good growth in its balance sheet (credit and deposit growth reached 7% and 12% respectively over the same period in 2021).

Vietcombank was forecast to have pre-tax profit of VND9,500 - 10,000 billion, up 10-16% compared to the same period in 2021. The reason was that Vietcombank's credit growth remained strong in the quarter (up 6-7%). Net Interest Margin (NIM) also improved thanks to the optimization of the loan/deposit ratio (LDR). In addition, SSI Research also believed that Vietcombank might record a bancassurance prepaid fee in the period, which was similar to the same period last year.

Sacombank also experienced strong profit growth in the first quarter of 2022 with an increase of 40-50% over the same period (probably reaching VND1,400-1,500 billion in pre-tax profit), mainly thanks to strong operating income and control of contingency costs.

At the recent General Meeting of Shareholders, Mr. Tu Tien Phat, General Director, said that in the first quarter, ACB's consolidated profit was about VND4,200 billion, up 35% over the same period. The service and insurance segments grew well. Non-interest income was about VND1,300 billion, while bancassurance led the market.

In the document submitted to shareholders, MSB also had a plan to divest from FCCOM Financial Company, if successful, the estimated value of the deal would be not less than US$100 million and MSB could collect VND1,800 - 2,000 billion in profit in 2022.

Banks still have many motivations

For a long time, credit and corporate bonds have played an important role in the revenue of the banking system. According to the report on Vietnam's corporate bond market in 2021, the 15 commercial banks monitored by SSI Research, the total balance of bonds of economic organizations that commercial banks invested was about VND214,000 billion by the end of 2021, an increase of 17% compared to the end of the previous year.

In terms of credit, by the end of March 2022, it had increased sharply by 5.1% compared to the end of 2021, equivalent to 15.9% over the same period, of which the loan capital inflow into the real estate sector accounted for about 18-20% of total credit.

But according to experts, bank profits rely heavily on credit. The reason is that banks have a lot of "chances" to increase profits as well as direct credit to production and business fields, priority areas according to the policy of the Government, serving the legitimate needs of people and enterprises. SSI's banking report said that the positive factors made the profits of the banking group reach a higher level than current estimates such as a better-than-expected economic recovery and extraordinary income from bancassurance.

In addition, according to experts, many other factors also help banks improve profits such as digital banking is increasingly developing, helping banks reduce costs. Or many banks raise the provisioning level above the prescribed level (making 100% provision for structural debt while allowing provision for three years), so the opportunity to refund the provision, and increase profits is very large.

Along with that, Vietnam's life insurance market is in a period of rapid development with an average growth rate of 30% per year in recent years, so up to now, there have been 26 banks in Vietnam that have cooperated in the development of life insurance products. In fact, the revenue from bancassurance is being promoted by banks and more and more exclusive deals are signed between banks and insurance companies with a value of up to tens of millions of US dollars.