Vietcombank firmly holds the top position
Closing 2023, the picture of the banking industry gradually emerged with the total after-tax profit of banks reaching about 203,500 billion VND, an increase of 3.8% over the previous year.
Accordingly, Vietcombank maintained its top position with pre-tax profit reaching VND41,243 billion; after-tax profit reaching VND33,054 billion, up nearly 10.5% over the previous year.
However, in 2023, Vietcombank plans to have a pre-tax profit of VND43,000 billion. Thus, compared to the set target, the bank has only achieved 96% of the profit target.
However, this figure is still far ahead of the runner-up BIDV with pre-tax profit of VND 27,650 billion and after-tax profit of VND 22,027 billion, up 20% over the previous year.
MB ranked 3rd with pre-tax profit reaching over 26,306 billion VND, after-tax profit 20,667 billion VND, up 18.3% over the same period.
VietinBank and Techcombank ranked 4th and 5th respectively in the profit rankings with pre-tax profits of VND25,100 billion and VND22,888 billion, respectively; after-tax profits were VND20,133 billion and VND18,191 billion, respectively.
Ranked 6th is ACB 6 with pre-tax profit of nearly 20,100 billion VND, after-tax profit reaching 16,045 billion VND, up 17% compared to 2022.
HDBank ranked after ACB with pre-tax profit in 2023 reaching VND 13,017 billion and after-tax profit reaching VND 10,366 billion, up 25.9%.
Although pre-tax profit decreased by 48% to VND 10,987 billion, and after-tax profit decreased by 48.9% to VND 8,641 billion, VPBank still occupies the 8th position in the profit ranking.
9th place belongs to VIB with pre-tax and after-tax profits increasing slightly by 1% compared to 2022, reaching VND 10,703 billion and VND 8,562 billion respectively in 2023.
Sacombank is in the top 10 with pre-tax profit of VND9,595 billion, up 51%; after-tax profit reached VND7,717 billion, up 53% over the previous year, this is also the highest growth rate among the 28 banks that have announced financial reports.
Many banks make big profits from securities trading
In 2023, most of the income of banks in 2023 will still come from credit activities. However, many banks will still earn large profits from trading securities, foreign exchange, and services.
For example, in the Big4 group, BIDV's consolidated financial report shows that the bank's net profit from trading and investment securities increased 14 times compared to the previous year.
For VietinBank, the bank's net profit from trading securities trading activities increased dramatically, reversing from a loss of VND112 billion last year to VND293 billion. Similarly, at Vietcombank, the bank's bright spot was its trading securities activities, which brought in a profit of VND124 billion, while in the same period this segment caused the bank to lose VND115 billion.
For many private commercial banks, trading securities is also a bright spot in business results. For example, net profit from trading and investing securities increased by nearly 200% at OCB, increased by 267% at HDBank or ACB invested more than 70,000 billion VND in securities, earning more than 2,647 billion VND in profit...
Commenting on this issue, Dr. Chau Dinh Linh, Banking University of Ho Chi Minh City, said that such investment profits help banks diversify their revenue sources, bringing high profitability. Investment profits have contributed to the bank's profit "pie", helping to spread risks for banking operations and avoid dependence on credit activities.
According to Associate Professor Dr. Nguyen Huu Huan - Ho Chi Minh City University of Economics, the reason why banks increase investment in the above activities is because of excess capital, which can be mobilized but is difficult to lend.
At the same time, in 2023, in the context of the main source of revenue, net interest income, decreasing or not growing much, banks will look for other income such as M&A, investment... to compensate for the decrease in profits, ensuring profit growth rate.
However, Mr. Huan said that such investment profits are not necessarily good for the banking system, because they are far from the bank's main business activities, which are income from interest and service fees.
Besides, over-reliance on investment profits also brings risks to banks due to instability. “Currently, we can earn a lot, but who knows, we might lose money later,” said Mr. Huan.
Profits won't see much of a breakthrough in 2024
Giving a forecast for bank profits in 2024, Mr. Linh said that profits will have a higher growth rate than in 2023. All macro factors are becoming more positive.
However, bank profits will also be strongly differentiated, with top banks, with profits over 10,000 billion VND, continuing to maintain their performance, and even the profit growth trend will be higher than last year.
Meanwhile, smaller banks, which have to focus on overcoming bad debt risks, will also see an increase in profits, but not as much as the top group. “Profits will improve slightly in 2024, but there won’t be much of a breakthrough,” Linh said.
On Mr. Huan's side, the increase and decrease in profits are difficult to predict in 2024 because they depend on many factors. He pointed out risks that will restrain the growth of bank profits, such as the Fed keeping interest rates unchanged, not reducing them as expected until at least June. The slow recovery of the world economy affects the domestic economy. Bad debts are unlikely to improve quickly. According to Mr. Huan, banks will still face difficulties in 2024.
MB Securities Corporation (MBS) commented that the poor business results in 2023 created a low comparison base for growth in 2024. In addition, MBS expects credit growth to be positive along with improved NIM thanks to the maintained low interest rate environment, and the after-tax profits of most banks are expected to be positive. The after-tax profits of the banks monitored by MBS are forecast to grow by 25.1% year-on-year in 2024.
According to Mirae Asset Vietnam Securities Analysis Center, although banks are likely to still have to bear the same high provisioning level as in 2023 next year.
However, with the expectation that the NPL ratio will peak soon, it is likely that indicators of bank asset quality will recover soon in late 2024 or at most in 2025. The drivers of profit growth in 2024 will include factors such as the recovery of NIM, higher credit growth, and the low base established in 2023.
In the short term, non-interest income sources such as banca services or recovery of processed bad debts will be variables for the banking industry's profit growth next year, especially with the expectation of the real estate industry recovering from 2024. At the same time, the application of technology in service provision will help banks reduce the correlation between operating income and costs (improved CIR) .
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