Although the first quarter has not ended, many bank leaders have revealed that the profit growth in the first quarter (Q1) of 2018 is likely to be 20-25 percent over the same period of 2017.
The main reason the good profit growth right in Q this year is the positive credit growth instead of negative growth as in the same period of several years earlier.
General director of a bank based in Hochiminh city said that the bank’s pre-provision profit in the first three month of the year is estimated at about one trillion dong. However, as having to provision for the special bonds of the unsettled bad debts sold to Vietnam Asset Management Company (VAMC), the bank’s remaining profit in Q1 is likely to be several hundreds of billion dong. With a favourable start, his bank expects a positive completion of 2018 target.
The credit of the entire banking system by the end of February 8th 2018 increased by 2.04 percent compared to late 2017, equivalent to 150 trillion dong, according to information from senior leader of the Credit Management Department (State Bank of Vietnam (SBV)). This development is more positive than the previous forecast of the National Financial Supervision Commission (NFSC). Specifically, the NFSC said that credit is expected to rise fast from the end of Q1 2018, and the operation of the system of credit institutions (CIs) in 2018 will maintain the growth level achieved in 2017.
Information from Tien Phong Commercial Joint Stock Bank (TPBank), in the first two months of the year, the profit after provisions for risks of the bank reached 275.8 billion dong, nearly doubled the same period of 2017. The outstanding loans of market 1 of TPBank by the end of February were 76.782 trillion dong, and mobilisation fund was 106.198 trillion dong. The bank’s bad debt ratio was controlled at 0.97 percent, in line with the plan.
Leader of a bank with charter capital of over 15 trillion dong said that compared to the same period of 2017, the bank’s profit in Q1 is more positive thanks to the good credit growth. If January and the first half of February was the peak time for bank loans as customers demand increased high during the Tet holiday, the development in March this year was also different as credit grows high thanks to the preferential policies on interest rates. As estimated, the outstanding loans in Q1 2018 would rise by 3 percent compared to late 2017.
In addition to the high credit growth, banks said that a factor that has helped their banks more prosper in Q1 is the positive bad debt settlement, as banks have not had to spend much on risk provisioning like the previous years.
The season for Annual general Meeting (AGM) of banks is entering the peak time and many banks have impressed shareholders and the market with their profit plans.
Opening the AGM season, Vietnam Technological and Commercial Joint Stock Bank (Techcombank) submitted a pre-tax profit target of up to 10 trillion dong to shareholders. Shareholders committee of Vietnam Prosperity Commercial Joint Stock Bank (VPBank) has approved the 2018 pre-tax profit target of 10.8 trillion dong.
At Vietcombank, Chair of the Board of directors (BOD) Nghiem Xuan Thanh said that the bank initially set the pre-tax profit target at 12 trillion dong, but the target is likely to be raised to 13 trillion dong. With the above target, in 2018 is suggesting unprecedentedly huge profit numbers of the banks in Vietnam.
Assessing the factor affecting the banking sector in 2018, analysts of Saigon Securities Incorporation (SSI) said that credit will continue to be improved, in which the opportunity to proper of consumer credit segment is highly valued. The maximum ratio of short-term fund used for medium and long-term lending must be reduced from 50 percent to 45 percent, but this reduction is still acceptable for banks because it was initially set to be cut to 40 percent.
Regarding lending activities, the government has repeatedly issued a message requesting the banking sector to lower interest rates. This also raises a question about the policy influence on the Net Interest Margin (NIM) of the sector. However, according to SSI, the average cost of capital in 2018 will be reduced thanks to the government’s support policies and the significant improvement of the balance of payments I 2017 and 2018.
Specifically, the operating and OMO interest rates were cut by 0.25 percent per annum over the past year. The sale of stake of 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.
With the above factors, SSI forecasted that the profits at 14 banks which are listed and registered trading on the stock market (including Vietcombank, BIDV, VietinBank, VPBank, HDBank, Eximbank, MBBank, Sacombank, ACB, SHB, NCB, VIB Kienlongbank, and LienVietPostBank) will grow at an average of 32.9 percent in 2018.
