2023 is also the year the banking industry achieves its growth target lower than expected.
Although bad debt is expected to peak in the fourth quarter of 2023, the pressure on provisioning in 2024 according to the analyst group is still significant. The reason is that banks’ provisioning space will not be much left when the business results for the whole year of 2023 are forecast to be less positive, so when the effectiveness of Circular 02 expires on June 30, 2024 (being considered for extension by the State Bank) the pressure to make provision for restructured debts or non-restructured bad debts will increase.
However, the analysis team also noted that there will be a clear differentiation in asset quality between banks. Banks that have increased large provisions in 2023 and raised asset quality to a high level will likely have more room to handle, and will therefore have the advantage of higher profit growth.
In 2023, industry-wide credit growth will be low and NIM will decline. It is forecast that credit growth for the entire banking industry will only reach 10.5% in 2023.
Specifically, according to data from the State Bank, as of November 30, 2023, credit growth across the industry reached 9.15% compared to the beginning of the year (the same period reached 12.0%). Compared to the latest data on November 22, 2023, credit growth reached 8.21% compared to the beginning of the year, we think that credit growth in the entire industry has shown positive signs. However, this number is still quite far from the Government’s target of 14-15% in 2023.
The slow credit growth rate was predicted by us in advance, with the main reasons: such as the influence of weak world aggregate demand, Vietnam’s GDP in the first 9 months of 2023 will only increase by 4.24%, the real estate market , which is the area that attracts the largest source of credit capital, is still quiet as by the end of September, the number of transactions and the number of completed construction projects decreased by 31% and 33%, respectively.
According to MBS, in general, profit after tax of the entire banking industry has decreased by 2.5%. Total profit after tax of listed commercial banks decreased slightly by 1.4% in the third quarter of 2023, in which the group of State-owned commercial banks recorded more positive results with a growth of 14.2%, while profits Group profits of Joint Stock Commercial Banks decreased by 9.9%. The reason is weak credit throughout the industry; NIM of the entire industry decreased; Operating costs and provisioning costs increased by 7.7% and 5.4%, respectively.
According to the analysis team, ACB, TCB and STB are banks with positive profit growth. These banks have two factors: positive profit growth, thanks to good credit growth, NIM recovery and cost savings, and attractive valuations. The after-tax profits of banks tracked by MBS are forecast to grow by 25.1% in 2024. However, there is still a risk of asset quality deterioration.
As of December 2023, credit growth of listed banks only reached 12.0% while currency mobilization interest rates increased, causing net interest income (NII) of banks to decelerate. Although credit activities are still relatively slow, maintaining digital transformation activities to retain customers as well as promoting non-interest revenue activities such as foreign exchange trading, debt recovery and securities investment makes Operating costs increased slightly.
Currently, MBS’s opinion is that credit growth in 2024 can be expected to reach 13-14% with the full year GDP growth scenario reaching 5.9%. Retail lending activities such as consumer loans, home loans and car purchases will be strongly stimulated in a low interest rate environment. We think that real estate businesses will reduce product prices to get closer to buyers instead of prioritizing profits to free up cash flow when policies are more relaxed than before. This helps stimulate credit for the real estate industry. Similarly, consumer lending and car buying activities will also have similar policies to take advantage of the period of maintained low interest rates.
According to Tien Phong
