Customers at a bank in Hanoi. The small gap between deposit and lending rates will cause the banks’ net interest margin (NIM) and net profit to reduce. Photo baochinhphu.vn Accordingto Le Xuan Nghia, former deputy chairman of the National FinancialSupervisory Commission, the US Federal Reserve (Fed) will continuallyincrease interest rates this year, which will force Vietnamese banks toraise deposit rates.
Despitethe high increase in saving rates, domestic banks will not be able to raiselending rates accordingly to support the economy as directed by the Government.The small gap between deposit and lending rates will cause the banks’ netinterest margin (NIM) and net profit to reduce, Nghia explained.
Besides,for a long time, many banks have gained good profits from real estate credit,and investment in and issuance of corporate bonds. However, the tightening ofcash flows into the two channels in the near future may affect the banks’income.
Infact, many banks recorded high credit growth in Q1/2022 thanks to the strongincrease in corporate bond investment.
Bythe end of Q1/2022, the largest corporate bond balance numbers were recorded inVietnam Technological and Commercial Joint Stock Bank (Techcombank), MilitaryCommercial Joint Stock Bank (MB), Vietnam Prosperity Commercial Joint StockBank (VPBank), Tien Phong Commercial Joint Stock Bank (TPBank) and Saigon HanoiCommercial Joint Stock Bank (SHB), baodautu.vn reported.
Accordingto Nghia, banks are also under great pressure in terms of bad debts in thelast months of this year as the Government’s regulations on debt reschedulingwill expire from June this year.
Dueto the adverse impacts of the pandemic, the Government has allowedCOVID-19-affected customers to delay the loan repayment while allowingbanks to maintain the debt classifications. Therefore, a significant amount ofdebts can become bad debts when the regulation is no longer effective.
Financialstatements of banks in Q1 2022 also showed the bad debts at most banks worsenedin the quarter.
Inthe past two years, though banks have sharply raised their provisions for riskyloans, the provisions at many banks are under pressure to rise significantlywhen a large amount of debts are not allowed to be rescheduled.
Analystsof Saigon Securities Incorporation (SSI)’s Research said though the assetquality in Q1/2022 of banks is not a concern, the pressure of provisioningremained high, up by 18 per cent over the same period last year.
Accordingto experts, the biggest prospect for banks in the last months of the year isthe acceleration of digitalisation and the rise of current account savingsaccount (CASA) ratio, which will help lower the negative effects of the increasinginput costs.
Moreover,the recovery in credit demand is also expected to partly offset the NIMdecrease.
Inaddition, the revenue from insurance and divestment activities are predicted tobring huge profits for banks.
Inthe recent season of annual general meetings (AGM) of shareholders, most banksset positive pre-tax profit growth targets at 31 per cent on average. Businessperformance results of banks in Q1/2022, except Orient Commercial Joint StockBank (OCB), surpassed the set targets.
However,according to SSI Research, the Q1/2022 business results of banks have not fullyreflected the impacts of the recent moves to tighten real estate lending andcorporate bond issuance.
Theshort-term risks for banks remain until the impacts of the corporate bondmarket become clearer, SSI Research said./.
VNA
