MBB records strongest increase in credit market share in 5 years

25-Feb-2021 Intellasia | Doanh nghiep va Tiep thi | 7:03 AM Print This Post

According to an analysis report on the banking industry of Viet Dragon Securities Company (VDSC), the credit market has witnessed many changes over the past five years. Most state-owned banks recorded lower credit growth in the industry while private joint stock banks maintained high credit growth.

By the end of 2020, 26 listed banks have raised the total credit market share from 65.4 percent in late 2015 to 71.3 percent in 2020. If including Commercial Joint Stock Bank for Agriculture and Rural Development of Vietnam (Agribank) one of the two biggest lenders in the market 27 banks accounted for 84.5 percent of the total credit market share in 2020. However, most of the market share increase over the years belonged to private joint stock banks, while the market share of state-owned banks was shrunk.

The credit market can be divided into groups, the group of state-owned banks, the group of private joint stock banks which hold more than two percent of the credit market share; and the remaining group which holds more than one percent of credit market share.

Among the four biggest lenders, the capital pressure is different. The average five-year growth rate of this group fluctuated from 11.7 percent to 16.2%. In particular, Commercial Joint Stock Bank for Foreign Trade of Vietnam (Vietcombank) is the only bank that achieved higher growth rate than the industry’s average (16.2 percent compared to 14.6%). Meanwhile, Commercial Joint Stock Bank for Industry and Trade of Vietnam (Vietinbank) is limited by a thin capital base, high leverage, low efficiency and insufficient room to dilute the State’s ownership rate. Agribank also lost its credit market share and Commercial Joint Stock Bank for Investment and Development of Vietnam (BIDV) also witnessed the slowdown in credit growth in recent years, when the positive impact from the private placement has gradually decreased.

Overall, state-owned banks lost 142 basis points of credit market share in five years and Vietcombank is an exception with an increase of 64 basis points.

For private joint stock banks which hold more than two percent of credit market share (including Saigon Thuong Tin Commercial Joint Stock Bank (Sacombank), Military Commercial Joint Stock Bank (MB), Vietnam Technological and Commercial Joint Stock Bank (Techcombank), Vietnam Prosperity Commercial Joint Stock Bank (VPBank), Saigon Hanoi Commercial Joint Stock Bank (SHB), and Asia Commercial Joint Stock Bank (ACB), the prospects are different among banks in the group. This group has increased its credit market share by 3.5 percent since the end of 2015.

In particular, MBB takes the lead with an increase of 90 basis points. The increases in credit market share of Techcombank and VPBank were respectively 86 and 78 basis points, while ACB only improved its credit market share by an addition of 39 basis points. These four banks also outperformed other banks in the group in terms of market capitalisation.

Techcombank, MBB and VPBank are those with more than 20 percent of credit growth annually. The Capital Adequacy Ratio (CAR) of these banks is in the leading group.

Sacombank is the only bank that lost its credit market share (down by two basis points) with a low annual average credit growth of 14.5 percent due to the process of handling outstanding bad assets. SHB records an average credit growth of 18.8 percent each year.

For the remaining group of banks which have credit market share of less than two percent, most of them recorded high credit growth in 2016 2020. However, in fact, the high growth of this group is due to the low outstanding credit, as the total credit market share of these six banks is only approximately that of Vietcombank.

How will the credit market share be in the future?

VDSC said that the Vietnam’s economy still depends heavily on credit. Therefore, to maintain the Gross Domestic Product (GDP) growth of six to eight percent in the coming years as forecasted, the credit growth of the banking industry is estimated to be a double-digit number. For the year 2021, the credit growth rate is expected to be 11.4 percent to 14.7%, an average of 13.1%.

Large private joint stock banks including Techcombank, MBB, VPBank and ACB are expected to maintain their growth trend, above the industry average. In particular, ACB will maintain the core lending activities which is its advantage, while the corporate bonds will still make a large contribution to Techcombank’s credit growth.

The group of state-owned banks (except for Vietcombank) are still predicted to be under capital pressure. With high Return on Equity (ROE), low mobilisation costs and room to dilute the State’s ownership rate, VDSC believed that Vietcombank has many options to maintain or improve its CAR and keep a positive difference with the industry’s credit growth. The ongoing private placement will help strengthen Vietcombank’s capital buffer.

For VietinBank, it is forecasted that an improvement in asset quality will lead to improvements in Net Interest Margin (NIM) and ROE. This will reduce the pressure on CAR. Nevertheless, the issue of shares is important to achieve a double-digit credit growth in the coming years.

In general, raising capital and improving efficiency are essential for state-owned banks. However, VDSC said that the credit market share of these banks in the short term will maintain a downward trend due to the high growth of the corporate bond market.

Analysts also expect a change in the credit market share rankings as the large banks in the second group (Techcombank, VPBank, MBB and ACB) expand at a faster rate and have better buffers to maintain the upward momentum compared to the comparable banks.

VDSC mentioned that Techcombank is the first choice and maintained positive view on Vietcombank and ACB in this uncertain time.

 

Category: Finance, Vietnam

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