There are challenges in attraching low-interest deposits, photo Le Toan

At SHB’s 2024 AGM last week, CEO Ngo Thu Ha unveiled a pre-tax profit target of approximately $470.25 million, a 22.2 per cent increase over the previous year’s performance. Despite global economic uncertainties, Ha is confident in achieving these goals, citing an already robust profit of over $166.67 million by March.

Elsewhere, Nguyen Hoang Linh, CEO of MSB, reported significant growth at the close of the first quarter, with total assets reaching about $11.67 billion, marking over a 4 per cent increase.

“MSB saw a credit growth of over 5 per cent in a slowing sector, with customer loans and deposits growing by 4.7 and 4.1 per cent respectively. MSB’s pre-tax profit stood at more than $63.75 million, fulfilling 22.5 per cent of its yearly target,” Linh shared.

At TPBank, CEO Nguyen Hung announced a 2024 pre-tax profit goal of roughly $312.5 million, a 34 per cent on-year increase. With first-quarter profit of approximately $76.21 million and projected earnings surpassing $104.17 million by April’s end, TPBank’s targets are within reach.

VIB also showed a strong performance, with a first-quarter pre-tax profit exceeding $104.17 million; SeABank’s first-quarter results saw consolidated pre-tax profit of $62.75 million, a nearly 41 per cent increase from the previous year; and VPBank recorded nearly $174.58 million in consolidated pre-tax profit in the period, a 66 per cent increase over the prior quarter and 64 per cent on-year.

LPBank stood out with a first-quarter pre-tax profit of $120.25 million, completing 27.5 per cent of its annual goal and achieving an 84.4 per cent increase on-year. An LPBank executive cited a fourfold increase in net service income from the same period in 2023, alongside strong net interest earnings and efficient cost management as key growth drivers.

These performances highlight a departure from the cautious outlook depicted in earlier surveys by the State Bank of Vietnam, with many banks now pushing aggressively to boost service income to compensate for slower credit growth. For example, TPBank’s securities investments and MSB’s foreign exchange operations have contributed significantly to their profits.

While some banks like BAC A BANK showed modest growth and others like PGBank experienced declines, the overall trend suggests a positive shift in the banking sector’s performance.

Tran Thi Khanh Hien, head of Research at MB Securities (MBS), reported significant early-year advances within the Vietnamese banking sector, leading to notably higher industry valuations.

“Currently, the sector’s price-to-book ratio stands at 1.66, marking a 6.7 per cent increase over the annual average, albeit remaining 8.7 per cent below the three-year average,” she told VIR.

Dr. Can Van Luc, chief economist at BIDV Training School, provided an optimistic forecast, anticipating stronger profits based on the modest growth foundations set in 2023.

“Performance will vary among institutions, with differentiation driven by factors such as financial capacity, approved credit growth plans, asset quality, and fee-based income,” he said. “Notably, smaller banks may struggle to accelerate growth and could face deceleration due to competitive challenges in attracting low-interest deposits.”

“Next year’s economic recovery is poised to spur credit growth rates to between 14-15 per cent, eclipsing those seen in 2023, thereby bolstering income from core credit services as well as ancillary financial offerings such as payment solutions, digital banking, and foreign exchange activities,” Luc added.

Despite these positive indicators, Luc cautioned that several challenges could temper growth prospects, including rising risk provisioning in response to bad debts, and potential declines or persistently low values of secured assets. He also pointed out that major revenue streams from previous stages, such as bancassurance and off-balance sheet debt collection, might not quickly rebound.

“Additionally, operational costs are expected to rise owing to investments in technology and increasing salary expenses driven by government guidelines and the need to remain competitive in talent acquisition,” Luc stated.

Hien of MBS emphasised that certain banks are likely to outperform the industry average. She argued that banks that can maintain a resilient net interest margin, even amid interest rate cuts aimed at fostering competitive credit growth, would likely fare well. These banks typically benefit from a low cost of funds and strong CASA ratios.

“Banks with a stable and expanding credit portfolio, anchored by a loyal customer base, and those that have significantly enhanced their asset quality with substantial provisioning in 2023 are likely to experience reduced provisioning pressures in 2024. This will notably enhance their after-tax profits relative to the broader industry,” Hien said.