In the coming period, the financial market is expected to continue to be stable with credit being strictly controlled, especially in potential risk areas including real estate, securities, BOT and BT transport projects, to build a healthy financial system and to provide the best support for the goal of sustainable economic growth.
Vietnam banking industry in 20182019 is considered to be “growing in a new way”, though experts are more cautious than in previous years.
This is an assessment of Vietnam Report JSC in its announcement of the list of Top 10 prestigious commercial banks in Vietnam in 2019.
Handling bad debts has been sped up
The report noted that in the recent time, the State Bank (SBV) had played well its role in credit regulation, while maintaining the market economy. The credit growth rate of 2018 is 14 percent, lower than previous years (about 30 percent in the 2000s), and will likely continue at 14 percent15 percent in 2019. About banking performance as of the end of May 31st, credit outstanding balance for the economy increased by 5.75 percent compared to the end of 2018. Credit increased for most priority areas such as: export sector increasing by 13 percent; high technology application enterprises rising at 14.33 percent, small and medium enterprises (5.04 percent); agriculture and rural fields (5 percent) and supporting industries (4.11 percent). Deposit rates and deposits have increased reasonably and the fluctuation of exchange rates were not large, reflecting the initiative and flexibility in monetary policy management and implementation of SBV.
The effort of handling bad debts has been sped up. The implementation of bad debt solutions has been carried out synchronously together with measures to control and prevent newly arising bad debts, contributing to improving credit quality and reducing bad debt ratio of the system of credit institutions (CI). According to the accumulated balance from August 15, 2017 to the end of March 2019, the whole system handled VND227.86 trillion of bad debts, in which the internal bad debt settlement was VND117.8 trillion. Group 2 debts of banks tended to decrease in 2018 and thus reducing the pressure of making provisions in 2019.
Notably, increasing charter capital helps strengthen the financial capacity of commercial banks. Decision 1058/QD-TTg dated July 19, 2017 of the prime minister approving the scheme “Restructuring the system of credit institutions associated with handling bad debts in the period of 20162020″ has set out the targets including: Increasing charter capital to ensure capital adequacy ratio according to Basel II standards, and ensuring the dominant role of the State in state-owned commercial banks, in which the State holds a minimum of 65 percent of the total shares. Accordingly, the charter capital of the entire system as of March 2019 reached VND578.9 trillion, an increase of 0.45 percent compared to the end of 2018 and an increase of 63.5 percent compared to the end of 2011. Owner’s equity of the whole system reached VND792.6 trillion, an increase of 4.2 percent compared to the end of 2018 and 20.1 percent compared to the end of 2017.
The efforts of the government and the SBV in managing monetary policy and banking activities have been recognised and highly appreciated by international credit institutions. Fitch has upgraded Vietnam’s credit rating from BB- to BB; while S&P for the first time in 9 years has adjusted the credit rating of Vietnam from BB- to BB.
Prioritising the application of new technologies
According to survey of commercial banks operating in Vietnam in June 2019, nearly three-quarters of the banks said they would prioritise research and application of new technologies in the management system, customer service; more than three out of five banks planned to invest in advanced enterprise management systems. In addition to the priorities related to business operations, more than 50 percent of banks expressed interest in improving their reputation and image on the media.
According to Vietnam Report, building a bank image on the media in the era of information technology development is a particularly important task for banks. In fact, media research shows that banking is the best communication field, with a continuous and diverse presence on financial banking and investment newspapers as well as news sites with the greatest number of readers. In the last 12 months, among the 1,440 coding units around 4 topics (out of the total of 24 theme groups covering information, not including Finance and Business groups), including: Public image, Research Development, Human Resources and Strategic Cooperation, Events (10.2 percent), Cooperation with other companies (9.4 percent) and Positive images (6.5 percent) are 3 groups mentioned the most. This shows that recently banks have actively cooperated with other companies (Fintech, insurance) to launch new products/utilities that are more suitable to the trend and customer needs.
With the positive policy support of the government and SBV attached to the policy of building a healthy and transparent banking system, including the internal function to start forming professional ethical standards, commercial banks will have many opportunities to grow and develop. Hence, the image of the banking industry has also been improved, while the prestige and trust have been strengthened.
However, according to the report, it should be noted that the pressure on information security, cyber security, transaction safety always follow the banking industry. Commercial banks should carefully consider allocating resources for priority strategies, consider slow growth but control the situation before incidents arise during operation.