Banks feel worried about negative profit growth in 2020

24-Oct-2020 Intellasia | VnEconomy | 6:02 AM Print This Post

The Forecast and Statistics Department of the State Bank of Vietnam (SBV) had just reported the survey results on credit institutions’ business trends in Q4/2020. Specifically, the report showed that the forecast trend of the previous period continued. In this survey, the depositlending interest rate was expected to decrease in Q4/2020. On average, the whole system’s expectation and market interest rate level were expected to decrease by 0.1 percentage points.

The overall risk of customer groups increased in Q3 and might continue the rise in Q4, but the growth rate slowed down. Two groups of customers assessed by 50 percent to 52.9 percent of credit institutions as having high increased risks included small and medium enterprises, joint-stock companies, limited companies and private businesses. 9.3 percent of credit institutions planned to organise internal factors to reduce the unit’s business situation in 2020, mainly due to the unit’s financial capacity and the policies on interest rates, credit, and the exchange rate of the unit.

In terms of capital mobilisation, credit institutions expected an average increase of 3.4 percent in Q4 and 8.7 percent in 2020. Most groups raised their forecast of capital mobilisation growth in 2020 compared to June’s survey period, which was still lower than the actual and expected increase in the same period last year. Deposit with a term of over one year could increase higher than that of less than one year.

Regarding credit balance, credit institutions expected an increase of 4.7 percent in Q4 and 11.4 percent in the whole year 2020. Compared to the last survey in June, the group of small joint-stock commercial banks, large joint-stock commercial banks, and foreign banks had both raised their credit growth expectations for themselves in 2020.

Notably, the business situation in Q3 had not improved as expected by credit institutions in the previous survey. The proportion of credit institutions reporting that the business situation to decline was twice as high as expected.

Many credit institutions expected that in Q4, the business situation would improve compared to the previous quarters. However, it was likely that for the whole of 2020, the number of credit institutions that rated the business situation in 2020 ‘slightly declining’ compared to 2019 would continue to increase, with 48.6 percent of credit institutions expecting the business situation ‘improved’ than in 2019. Along with the trend of assessing the unfavourable business situation, the number of credit institutions concerned about the negative growth of profit before tax in 2020 led to the average expectation of profit before tax growth of the whole system following the downward adjustment to previous surveys.

The survey was conducted from August 25, 2020, to September 14, 2020, with all of the credit institutions and branches of SBV in Vietnam participating. The rate of response reached 97%.

 

Category: Finance, Vietnam

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