VNDirect lowers credit growth forecast this year

25-Sep-2020 Intellasia | Dien dan Doanh nghiep | 6:02 AM Print This Post

According to VNDIRECT, the possibility that the COVID-19 epidemic could be curbed at the end of Q3/2020 would boost credit growth in Q4/2020 and 2021. However, this company had lowered its credit growth forecast in 2020 from 11 percent to 9 percent to reflect the credit growth rate in the first six months of 2020 which was lower than expected at only 3.65%. In addition, VNDIRECT also forecasted that credit growth in 2021 would reach 13 percent to 14 percent thanks to loosening monetary policy and speeding up the disbursement of public investment.

VNDIRECT said that several factors would drive credit activities. Accordingly, the impact of the second COVID-19 outbreak was less severe than the first one. Furthermore, the COVID-19 vaccine was being tested in other countries, of which success would allow governments to confidently reopen borders, promote production and business, and improve trade and production, promoting services, such as tourism.

In addition, the reduction of executive interest rates helped banks reduce pressure on capital costs, thereby reducing lending interest rates, promoting new lending businesses to serve the recovery of production and business.

Also, the promotion of public investment would create jobs, indirectly boost credit demand. VNDIRECT also expected the government to continue promoting public investment in 2021 to support economic growth.

According to the latest survey by the State Bank of Vietnam (SBV), the demand for credit would also improve significantly in the second half of this year, thanks to some proactive measures of the government to revive the economy. Statistics also showed that exports, retail, and textiles would be the main drivers of credit growth.

The net income margin (NIM) tended to decrease

According to VNDIRECT, banks continued to record declining asset yields due to the recent interest rate cuts. The average yield of assets in the first six months of 2020 of state-owned banks decreased by 21 basis points compared to the same period last year, while which of private banks increased only eight basis points compared to the same period last year.

Considering each bank, VNDIRECT thought that banks had an advantage in capital costs due to their high ratio of demand deposits to total customer deposits (CASA) or banks with room to penetrate. In the retail lending segment, NIM had maintained or improved in the first six months of 2020. Specifically, Vietnam Technological and Commercial Joint-Stock Bank (Techcombank), HCM City Development Joint Stock Commercial Bank (HDBank), Tien Phong Commercial Joint Stock Bank (TPBank) had NIM increased by 83 basis points, 46 basis points, 26 basis points, respectively compared with the same period last year. At the same time, Military Commercial Joint Stock Bank (MBB) maintained a stable NIM in the first six months of 2020.

Although some banks’ NIM improved in the first six months of 2020, the overall NIM of banks still tended to fall in 2020 because banks reduced interest rates for loans for new loans to promote lending, while the reduction of executive interest rates had not immediately reflected in the cost of capital mobilisation of banks due to time lag.

Besides, the reduction in interest income from restructured loans and the reduction/exemption of interest payments put pressure on interest income, affecting banks’ asset yields.

According to VNDIRECT, if the epidemic were to be controlled at the end of Q3/2020, production and business activities recovered, banks would be able to recoup interest income from structured loans, improving NIM by 2021, albeit to varying degrees.


Category: Finance, Vietnam

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