Banks are promoting digitization, aiming for high growth in the retail segment.

Full of confidence

By the end of 2021, the profit “picture” of the banking industry is extremely positive, when the total profit after tax of 27 listed banks increased by more than 30% compared to 2020, largely thanks to net interest income and higher fee income.

Therefore, according to experts, this profit “picture” will continue to be “brighter” in 2022.

According to experts of Maybank Kim Eng Securities Company (MBKE), in addition to the driving force for credit growth due to strong credit demand after the pandemic, the bank's income from the fee is expected to increase by 30-40% in 2022, while profit margin (NIM) will remain stable.

Accordingly, banks will maintain an average profit growth of 25% in 2022, of which the last 6 months of the year will be a period of strong acceleration when provisioning can be reduced thanks to the operating environment.

Similarly, SSI Research estimates the average pre-tax profit growth of banks in 2022 to be 21% compared to 2021, higher than the 13% growth of the 96 companies in SSI's research area.

This estimate does not include potential extraordinary income from exclusive insurance distribution fees through banks (bancassurance) or divestment of subsidiaries of VietinBank, HDBank, Techcombank, MB.

SSI Research also believes that the State-owned joint stock commercial banks are estimated to increase profits by 19%, while other joint stock commercial banks can achieve 22% growth compared to 2021 due to the brighter prospect of credit growth.

Besides, in the first half of 2022, profit growth will be modest and only really get stronger from the second quarter with VietinBank, Vietcombank, MB and from the third quarter with other banks.

The report of BSC Securities Company also assessed that in 2022, credit demand would continue to be at a high level of about 140%. As a result, the growth rate of the banking industry would reach 22.2% thanks to the post-pandemic recovery and lower profit base in 2021.

Talking about this issue, Mr. Nguyen Dinh Tung, General Director of Orient Commercial Joint Stock Bank (OCB), said that the pandemic was still complicated in 2022, but many countries, including Vietnam, no longer have a lockdown order, helping maintain export activities of Vietnam.

Along with that, in 2022, the Government planned to increase disbursement of public investment capital and stimulate the private sector, this would help the purchasing power to increase again, creating favorable conditions for developing business activities of banks.

Why are banks growing strongly?

Credit is forecasted to grow strongly again, but for a long time, banks have gradually changed their strategies to make the retail segment break out, becoming the main growth engine of banks this year.

Mr. Nguyen Hoang Linh, General Director of MSB, said that in 2022, the bank set a target of profit before tax of VND6,800 billion, an increase of about 33%. To achieve this result, in addition to the credit segment focusing on retail and SME, MSB would continue to promote fee collection activities, accelerate the digitalization of banking services to contribute to an increasing demand deposit (CASA), reduce the cost of capital and reducing the cost of income ratio (CIR).

Sharing the same opinion, VPBank's leaders also said that the retail and consumer loans segments accelerated in the fourth quarter of 2021, contributing to the business results in 2021, along with an effective digital transformation strategy that would help the bank continue to grow in 2022 as well as the coming years. Accordingly, this bank aimed to achieve an average profit growth rate of 30-35% in the next 5 years.

Also optimistic about profits, VIB leaders said that the bank aimed to grow strongly with double growth in profit reaching over 30%/year.

According to Ms. Tran Thu Huong, Strategy Director and Head of Retail Banking Division of VIB, in the past 5 years, VIB's retail banking segment had grown 30 times in profit.

In 2022, VIB continued to set a high growth target in the retail segment, in which the goal was to pioneer personalized products to meet the increasing demands of the market, targeting the young customer segment which accounted for about 85% of the customer portfolio in the next 5 years.

In addition, according to many forecasts, in 2022, income from payment services will recover along with the resumption of international payments and trade finance. Meanwhile, the bancassurance cross-selling market is forecasted to continue to be active. For example, VietinBank will complete a contract with Manulife, Techcombank and VPBank will continue to renegotiate contracts with Manulife and AIA. HDBank and LienVietPostBank will be able to sign a new exclusive bancassurance contract.

According to experts of BSC, retail concentration will continue to be a spearhead in 2022 for many banks because the low loan size per customer helps the bank to reduce concentration risks and the NIM is higher than other big customers.

This will make the competition for CASA market share relatively fierce when the “big players” simultaneously reduce service fees at the end of 2021.

Some banks have the advantage of a high CASA ratio with a 30% higher rate which will have a low cost of capital, thereby increasing lending efficiency.

According to the General Director of OCB, the business outlook of banks is also clearly differentiated due to the increased level of competition in the industry. The group of banks with a high capital adequacy ratio (CAR) and dynamic operating model will continue to be granted a higher credit growth room than the industry average.

However, talking about the impact of bad debt, experts said that asset quality was forecast to be under control when the bad debt coverage ratio was at a high level and improving.

BSC believed that the restructuring loan balance would not affect the business results of banks because the total income generated by the bank was high, helping the banks to be able to make additional deductions without much impact on growth and it was expected that restructuring debt would not increase thanks to the reopening of the economy.

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Ms. Do Hong Van, Head of Data Analytics Division, FiinGroup Financial Information Services: 4 factors for growth

Expected growth in profit after tax of the banking industry will reach 20-25% in 2022, the banking industry is expected to develop stronger than the block of non-financial businesses.

This is the difference compared to 2021.

Banks will grow well thanks to four factors: Firstly, credit growth due to the Government's economic stimulus efforts. Secondly, profit margin (NIM) can continue to grow even if deposit interest rates increase, because some banks no longer have to support interest rates as in 2021. Thirdly, income from fees will bounce back when the economy recovers. Fourthly, in 2021, some banks had to make provisions before the deadline of Circular 03, this year they will not have to make any more provisions, so there is a chance to integrate.

Mr. Dao Phuc Tuong, CFA- Financial expert: High appreciation

The banking group is still the industry with a high growth rate in the market compared to other industries. However, the valuation of bank shares is currently high. Therefore, the key point is that the next general meeting of shareholders will be an “important point” to attract more attention to bank stocks.

Huong Diu (recording)