Foreign currency liquidity tends to narrow

14-Jan-2021 Intellasia | Dau tu Chung khoan | 6:02 AM Print This Post

The survey on business trends of credit institutions (CIs) recently announced by the Department of Statistics and Forecasting (under the State Bank of Vietnam (SBV)) showed that in 2020, the payment needs, especially non-cash payments, exceeded the needs for savings and borrowings, appropriately reflecting the actual situation during the epidemic in 2020.

Assessing the fourth quarter (Q4) of 2020 alone, the customers’ demand for products and services improved positively compared to the previous quarter with 41.3 percent of CIs saying that the total demand increased (it was 31.7 percent in Q3 of 2020), in which the payment demand saw the clearest improvement.

On that basis, CIs raised the expectations of customers’ demands for banking services in Q1 of 2021 and the whole year 2021 (52.5 75 percent of CIs expected “increase” compared to the 50 71.4 percent of CIs having similar expectation in the previous quarter). In particular, the need for credit is expected to increase more than the needs for depositing and payment.

The average prices of products and services (marginal interest rates and service fees) in Q4 of 2020 continued to be lowered (35.9 percent of CIs). In general, in 2020, 45.2 percent of CIs said to have cut the average prices of products and services, while 44.2 percent of CIs said to make no change. The product and service average prices are expected to be further cut in Q1 of 2021 (20.6 percent of CIs expected slight reduction).

Regarding liquidity issue, CIs said that by the end of Q4 of 2020, the liquidity in dong was more abundant but that in foreign currency tended to narrow down compared to the end of Q3 of 2020. In 2020, the majority of CIs said that the liquidity situation was more abundant than 2019 (the balance index increased to 40.5 percent from 38.2 percent in 2019). The liquidity of the entire system is expected to maintain good state in Q1 of 2021 and the whole year 2021, which is the basis for the expectation that the credit will recover strongly after the Covid-19 pandemic.

CIs said that the interest rate level decreased significantly in 2020 and is expected to slightly decline in Q1 of 2021 with an expected average reduction of 0.05 0.16 percentage point compared to the end of 2020.

The ratio of CIs that assessed the overall risks of customer groups in 2020 to increase compared to 2019 was at the highest level (52.9%) in the past five years. The group of small and medium-sized enterprises and joint stock, limited liability and private companies were considered having higher risks compared to other groups of customers.

In Q4 of 2020 alone, the overall risks of customer groups were said to slow down obviously with 27 percent of CIs seeing that the risk level “increased”, the lowest in the past three quarters, and the ratio of CIs assessing that the risk level “slightly fell” was 10.6%, the highest in the past six quarters. Despite concerning that risks may slightly increase in Q1 of 2021, CIs have more optimistic expectation of the overall risk level in 2021, leaning towards the tendency of risk to “slightly fall” compared to 2020.

The mobilisation of the entire CI system is expected to increase by an average of 3.5 percent in Q1 of 2021 and by 11.9 percent in 2021. Most CIs raised their forecasts for growth in capital mobilisation in 2021, except for the group of small joint stock banks.

The outstanding credit of the banking system was forecasted by CIs to increase by 3.6 percent in Q1 of 2021 and by 13 percent in 2021. Except for the group of large joint stock banks, the remaining groups of CIs raised the forecasts of their credit growth in 2021.

The bad debt settlement situation of the banking system in Q4 of 2020 saw more positive changes compared to Q3 of 2020 with higher number of CIs saying the bad debts to fall and lower number of CIs saying the bad debts to increase compared to the previous survey.

About 78.2 percent of CIs said that their workforce remained unchanged or increased compared to the previous quarter, reaching the highest level since the survey in Q1 of 2020. However, the rate of recruitment slowed down in Q4 of 2020 with 43.9 percent of CIs said to recruit more employees in the quarter (lower than the 47.7 percent in the previous quarter).

By the end of 2020, 60 percent of CIs said that they hired more employees, 26.7 percent of CIs said that they maintained the same number of employees, and 13.3 percent of CIs said that they cut their workforce in the year (only a little less than the corresponding rates of 61.2 percent 25.2 percent 12.6 percent in 2019).

According to CIs, the business situation in Q4 of 2020 recorded positive improvements after suffering negative effects from the Covid-19 epidemic in the first three quarters of the year. about 62 percent of CIs saw that the business situation in Q4 of 2020 improved compared to Q3 of 2020 (higher than the 55 percent in the previous quarter). The number of CIs said that the business in Q4 of 2020 declined also fell considerably to 12.4 percent while it was 21.3 percent in Q3 of 2020.

In the whole year 2020, the balance index was 17.6%, the lowest level from 2014 until now, showing that year 2020 experienced the most difficult business situation in the past five years.

Regarding future outlook, 66.3 percent of CIs expected the business situation in Q1 of 2021 to improve compared to Q4 of 2020, and 81 percent of CIs hoped that the business situation in 2021 will be better than 2020.

The balance index of 51.4 percent the lowest level from 2014 until now showed that CIs are still concerned about the difficulties in 2021, due to the negative impacts in the post-Covid-19 period.

The survey results showed that the overall profit growth rate of 2020 is lower than 2019 due to the negative impacts of the Covid-19 pandemic and because the CIs have actively lowered the average prices of products and services to support businesses and individuals. Most of the CI groups expected the pre-tax profit to recover and grow well compared to 2020.

“Assessing the whole year 2020, CIs said that the factor of “customer care policies and services” had the most important positive influence to help improve the business performance of the unit (69.2 percent of CIs) and 68 percent of CIs said that the overall subjective factors helped improve the business situation of the unit,” said the report.

 

Category: Finance, Vietnam

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