Bank profit outlook in H2 remains bright

23-Sep-2021 Intellasia | Nhip cau Dau tu | 5:02 AM Print This Post

Although the credit growth in the first half (H1) of 2021 was impressive at 6.44 percent compared to the end of 2020 (3.65 percent year-on-year), the credit growth limits additionally granted to banks in recent time have partially shown the caution of the SBV towards the capital market.

It can be mentioned that Military Commercial Joint Stock Bank (MBB) was granted 15 percent credit growth limit in 2021 compared to the 20 percent in 2020, or Vietnam Technological Commercial Joint Stock Bank (Techcombank) was allocated 17 percent credit growth limit compared to the 23 percent in 2020.

Data of the General Statistical Office showed that the Gross Domestic Product (GDP) growth in H1 of Vietnam was 5.64%, approximately the same as the credit growth. Accordingly, the ratio of credit growth in the entire system to GDP remained at around 140%.

The GDP growth will somewhat slowdown in H2 due to the impact of the more widely applied social distancing measures, especially in large and densely populated cities. Mirae Asset Securities Company believed that the credit growth for the entire banking industry in 2021 will be about eight to nine percent, higher than the expected rate in the worst scenario of the SBV which is seven to eight percent.

Mirae Asset also predicted that the asset quality of the banking industry will go down when banks are still allowed to reschedule debts for customers hit by the Covid-19 pandemic until mid-2022 according to Circular 14.

Mirae Asset assessed that the banking industry is still a bright spot in terms of profits in the context of the epidemic. Banks’ profit is generally expected to maintain double-digit growth rates in 2021 thanks to the positive business results in H1.

In the context when banks are lowering interest rates to support customers in the last months of 2021 at the request of the SBV, Mirae Asset expects a strong differentiation among banks, in which the group of private joint stock banks with good asset quality and lower number of customers affected by the pandemic will have more potential in the last two quarters of 2021.

Recently, some banks have announced to reduce lending interest rates by about 0.5 percentage point to customers operating in affected areas such as HCM City or Binh Duong province. In addition, many banks have provided additional credit packages with interest rates not considerably higher than the government bond yields.

Mirae Asset said that banks will increase support packages from now until the end of the year. This will adversely affect banks’ income in the short term, while the ability to control the epidemic and the speed of the economy’s recovery will affect banks in the medium term.

The current overall valuation of the banking industry, according to Mirae Asset, is relatively reasonable with Price to Book ratio (P/B) of 2.0x, down by 13 percent compared to the peak levels of 2.3 2.4x.

 

Category: Finance, Vietnam

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