Bank profits in 2023 may be flat, some banks may have negative growth

December 15, 2023 09:30 Nhat Linh Print article

ANTD.VN - Pre-tax profits for the entire banking sector may remain flat in 2023, increasing by approximately 10% in 2024. Some banks will experience negative profit growth. Interest rates are expected to continue to fall by another 1-1.5% in 2024.

This assessment was made in a banking sector report recently published by Vietcombank Securities Company (VCBS).

According to VCBS analysts' forecasts, credit growth will continue to maintain a level of 12% in 2024. Credit growth will still be pressured by the slow recovery of the economy and the real estate market; however, the cooling of interest rates to low levels will create momentum for borrowing demand, especially for retail and small and medium-sized enterprises (SMEs).

The corporate bond portfolios of banks are expected to remain stable. Net interest margins (NIM) are projected to be flat or slightly higher in 2024 as capital costs improve; however, lending rates will continue to face downward pressure as banks compete to attract high-quality customers.

The potential for NIM expansion lies with the private customer segment, particularly those with strengths in retail and CASA (Current Account Savings Account).

Một số ngân hàng có thể tăng trưởng lợi nhuận âm

Some banks may experience negative profit growth.

Non-performing loans on the balance sheet and provisions for bad debts in 2023 remained under control thanks to supportive circulars and policies.

VCBS forecasts that profits across the entire banking sector will slow down or remain flat in 2023, with differentiated profit prospects among different banking groups in 2024, with growth rates around 10%, and some smaller banks expected to continue slowing down or even experience negative growth.

System-wide credit growth reached 9.15% by the end of November 2023, with the potential for a 12% increase in 2023. VCBS assesses that overall credit demand remains weak due to the slow recovery of the economy and the real estate market.

Deposit interest rates have fallen rapidly, and real lending interest rates have decreased by approximately 2-2.5% for new loans. However, interest rates for existing loans remain high, at around over 10% per year, due to a 3-6 month lag compared to deposit rates and varying degrees of reduction across different industries.

Interest rates are expected to continue to fall by approximately 1-1.5% in 2024.

Private commercial banks recorded a sharper decrease in lending interest rates compared to state-owned banks due to a rapid increase in loans with delayed interest payments and a reduction in lending rates to attract customers. It is expected that lending interest rates for this group of banks may improve in the near future as customers return to repaying their loans.

Banks' Net Interest Margin (NIM) is expected to recover from its low point in Q3 2023 as high-cost funding is fully absorbed, and the supply of low-cost CASA (Current Account Savings Account) increases again. However, there will be differentiation among banks.

Private banks with a large and consistent individual customer base are experiencing rapid growth in NIM thanks to the recovery of CASA ratios and retail lending as interest rates gradually decline.

The net interest margin (NIM) of the four state-owned commercial banks remained flat or increased slightly. The extent of improvement in NIM for the group of medium- and small-sized banks depends on the pressure to lower interest rates to compete for credit growth, and the speed of recovery in customer repayment capacity.

Regarding non-performing loans, at the end of Q3 2023, the on-balance sheet non-performing loan ratio of the banking system increased to 2.2% from 1.6% at the end of 2022, and the ratio of loans in group 2 also increased to 2.3% from 1.8% at the end of 2022; however, the quarterly decrease is a positive sign indicating that non-performing loans have peaked.

According to the State Bank of Vietnam's estimates, as of August 2023, the ratio of non-performing loans (NPLs) on the balance sheet and potential NPLs across the entire banking system (including SCB, Dong A, CB, Oceanbank, GPbank) was 5.12% and 8%, respectively.

The ratio of non-performing loans on the balance sheet and the level of provisioning are not expected to increase dramatically in 2023 thanks to Decree 08/2023/ND-CP supporting the extension of corporate bonds and Circular 02/2023/TT-NHNN allowing the restructuring of loans.

The process of handling non-performing loans continues to face difficulties due to the sluggish real estate market, the expiration of Resolution 42 on December 31, 2023, and the failure to pass the amended Law on Credit Institutions, creating a legal vacuum for handling non-performing loans.

Source link