In a recently published report, Agriseco believes that the banking industry will still achieve good profit growth in 2022, but there will be a clear divergence. In the coming time, net interest income of commercial banks may slow down due to limited credit room and declining NIM as deposit rates tend to increase.
According to data from the State Bank of Vietnam (SBV), credit growth in the first eight months of the year reached 9.91%. With the goal of increasing credit within 14%, the credit room in the last 4 months of the year is only about 4%.
Recently, the SBV has decided to loosen the official room for banks, ranging from 0.7% to 4%. Accordingly, the SBV mostly prioritizes banks with high CAR, good asset quality, high credit rating, and healthy credit portfolio structure. Sacombank was granted the highest credit limit in the industry (4%).
Following are some banks with good financial ratios such as Military Commercial Joint Stock Bank (MB) and Ho Chi Minh City Development Joint Stock Commercial Bank (HDBank), whose credit rooms were allowed to expand to more than 3%; while credit room of Joint Stock Commercial Bank for Foreign Trade of Vietnam (Vietcombank) was allowed to expand to 2.7%.
Agriseco estimates that the recent adjustment scale has not yet reached the target of 14% in the context that the State Bank has to balance between macro stability, economic growth and inflation. It is expected that there will be an additional loosening credit room in the year-end period for some banks.
Regarding net interest margin (NIM), Agriseco forecasts that NIM of the whole banking system may be under pressure in the coming time when deposite interest rates tend to increase but lending rates remain stable. In the context of inflationary pressure, high exchange rate, tight liquidity, interbank interest rates sometimes exceeding the record level of 7.5% in nearly a decade, the SBV has increased the operating interest rates (refinancing and rediscount rates) by 1% after nearly 2 years of stabilizing low levels.
Along with that, the ceiling interest rate for term deposits (1 month to less than 6 months) was increased to 5% while interest rates for demand deposits and deposits with terms of less than 1 month increased to 0.5%.
The current operating orientation of the State Bank is to increase deposit rates but still try to maintain stable lending rates to support the economy. In addition, Circular 08/2021 stipulating the adjustment of the ceiling of short-term capital ratio for medium and long-term loans from the current 37% to 34% at the beginning of October may also increase the cost of capital for banks.
Agriseco believes that NIM will see a divergence. In particular, NIM can be stable at banks that create a diverse ecosystem, promote digital technology development, diversify products and services, and have the ability to mobilize capital from international markets.
Regarding non-interest activities, Agriseco expects non-interest income to continue its upward trend in the second half of the year, with the main contribution being revenue from bancassurance services and card fees.
This securities company said that bancassurance revenue currently accounts for the majority of fee revenue of banks. According to the Vietnam Insurance Association, total life insurance premium revenue in the first half of the year was estimated at more than VND 84 trillion (up 15.6% over the same period).
In the coming time, banks may continue to receive prepaid fees allocated from exclusive deals with insurance companies.
As for the trading of bond, Agriseco believes that this business segment of banks may face obstacles when interest rates are inching up and the value of investments is recorded on a mark-to-market basis.
However, according to Agriseco, the corporate bond market has been less gloomy since the last quarter of 2022 when Decree 65 was issued, which will strengthen the legal corridor, reopen capital, and encourage businesses to promote mobilization through corporate bonds instead of just focusing on bank credit.
This securities company hopes that Decree 65 can harmonize the capital and currency markets, promote the development of finding medium and long-term capital through corporate bonds and short-term capital through banks.
In general, Agriseco assesses that it is difficult for banking profits in 2022 and 2023 to maintain high growth like in the period of 2020 - 2021. The growth momentum is further weakened when credit growth is limited, and NIM are under pressure because input interest rates tend to increase while lending rates are difficult to increase correspondingly.
Compiled by VietnamCredit