Econ
Banking industry projected to enjoy another prosperous year
The banking sector will enjoy another strong year in 2018, fuelled by the country’s higher economic growth, experts forecast.
According to Nguyen Anh Tu, Deputy Director General of the State Bank of Vietnam’s Monetary Policy Department, banking stocks did well in 2017 thanks to a favorable economic environment with a positive outlook for growth, well-anchored inflation, improved management of banks, better supervision by the government and a decrease in non-performing loans.
With economic growth expected to be even better this year, it would be another good year for the banking sector, Tu said.
Banks are more likely to make a profit on the back of a strong economy since it stimulates demand for credit, and Vietnam is a bank-based economy with 92 percent of capital in the economy provided by banks according to the National Financial Supervision Council, he said.
Retail lending is increasing due to demand from newly-established small businesses and SMEs, which have traditionally found it difficult to get corporate loans from banks, and increasing consumption by individuals due to positive expectations from the economy and rising affluence, he said.
According to a report from the Boston Consultant group, the size of the middle- and upper-income classes in the country will reach 33 million by 2020, creating huge demand for financial and insurance services.
According to data compiled by StoxPlus from 18 banks, who account for 60 percent of the country’s loans, retail loans are growing at double the rate of corporate loans, and increased their share to 37 percent of total loans.
Consumer finance has been growing rapidly and playing a part in the parent banks’ story, Nguyen Quang Thuan, CEO of financial and business information provider StoxPlus, said.
He cited the example of FE Credit, the consumer finance arm of Vietnam Prosperity Joint Stock Commercial Bank (VP Bank), which accounts for the majority of its parent company’s loans and helps VP Bank improve its earnings, or HDBank, which owns HD Saison, a growing consumer finance company.
Besides, lenders like Techcombank, Sacombank, VP Bank, SHB, and Military Bank have posted significant commission incomes from their partnerships with life insurers last year, he added.
He said banks are buying back their bad debts from the VAMC to collect them while their income from lending would remain at around 3 percent.
Fees earned through partnerships with third party financial services providers would drive the earnings growth of banks, especially those with large customer bases, he added.
Analysts of Saigon Securities Incorporation (SSI) said credit would continue to be improved, in which the opportunity of consumer credit to prosper was highly valued.
According to SSI, the average cost of capital in 2018 will be reduced because of the Government’s support policies and significant improvement in the balance of payments in 2017 and 2018. Specifically, the refinancing, rediscount, overnight and OMO (open market operations) interest rates were cut by 0.25 percentage points per year over the past year.
The sale of stake in State-owned enterprises in 2018 will continue to attract a large amount of foreign capital, leading to the need to pump a large amount of local currency into the system, SSI said.
Considering the above factors, SSI predicts that profits in 14 listed banks will surge at an average of 32.9 percent in 2018.
Many banks, such as Military Bank, VIB, HDBank, OCB and LienVietPostBank, have so far also estimated to meet 25-30 percent of their annual profit targets by the end of March, although the first quarter is usually the most sluggish for banks.
Profits in 14 listed banks are predicted to surge at an average of 32.9 percent in 2018
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Banks are more likely to make a profit on the back of a strong economy since it stimulates demand for credit, and Vietnam is a bank-based economy with 92 percent of capital in the economy provided by banks according to the National Financial Supervision Council, he said.
Retail lending is increasing due to demand from newly-established small businesses and SMEs, which have traditionally found it difficult to get corporate loans from banks, and increasing consumption by individuals due to positive expectations from the economy and rising affluence, he said.
According to a report from the Boston Consultant group, the size of the middle- and upper-income classes in the country will reach 33 million by 2020, creating huge demand for financial and insurance services.
According to data compiled by StoxPlus from 18 banks, who account for 60 percent of the country’s loans, retail loans are growing at double the rate of corporate loans, and increased their share to 37 percent of total loans.
Consumer finance has been growing rapidly and playing a part in the parent banks’ story, Nguyen Quang Thuan, CEO of financial and business information provider StoxPlus, said.
He cited the example of FE Credit, the consumer finance arm of Vietnam Prosperity Joint Stock Commercial Bank (VP Bank), which accounts for the majority of its parent company’s loans and helps VP Bank improve its earnings, or HDBank, which owns HD Saison, a growing consumer finance company.
Besides, lenders like Techcombank, Sacombank, VP Bank, SHB, and Military Bank have posted significant commission incomes from their partnerships with life insurers last year, he added.
He said banks are buying back their bad debts from the VAMC to collect them while their income from lending would remain at around 3 percent.
Fees earned through partnerships with third party financial services providers would drive the earnings growth of banks, especially those with large customer bases, he added.
Analysts of Saigon Securities Incorporation (SSI) said credit would continue to be improved, in which the opportunity of consumer credit to prosper was highly valued.
According to SSI, the average cost of capital in 2018 will be reduced because of the Government’s support policies and significant improvement in the balance of payments in 2017 and 2018. Specifically, the refinancing, rediscount, overnight and OMO (open market operations) interest rates were cut by 0.25 percentage points per year over the past year.
The sale of stake in State-owned enterprises in 2018 will continue to attract a large amount of foreign capital, leading to the need to pump a large amount of local currency into the system, SSI said.
Considering the above factors, SSI predicts that profits in 14 listed banks will surge at an average of 32.9 percent in 2018.
Many banks, such as Military Bank, VIB, HDBank, OCB and LienVietPostBank, have so far also estimated to meet 25-30 percent of their annual profit targets by the end of March, although the first quarter is usually the most sluggish for banks.
