VPBank's business prospects with the fulcrum of macroeconomic growth

Boosting Vietnam's Economic Growth: A Pillar of Monetary Policy

Vietnam's GDP growth is expected to decline from 8% in 2022 to just 3.3% in the first quarter of 2023. Therefore, to achieve the plan, the Government has proposed many support measures in terms of administration (for the real estate market), VAT reduction plan and especially monetary policy easing.

Deposit interest rates increased by more than 200 basis points by the end of 2022, to more than 8% for 12-month terms by the end of 2022. According to VinaCapital's report, the fund believes that the average 12-month deposit interest rate will decrease by 200 basis points compared to the beginning of the year (down to about 6%) to promote economic recovery and support businesses.

To further reduce deposit interest rates, liquidity in the banking system needs to improve significantly, and the most important way is to buy USD to increase foreign exchange reserves. VinaCapital expects the SBV to buy about USD 25 billion in foreign exchange reserves and inject liquidity into the banking system, boosting deposits across the system by 4% this year. Cutting interest rates and buying foreign exchange reserves to support liquidity in the banking system are important monetary easing measures that the operator will implement to support economic growth.

VPBank changes branch facade according to new positioning

Q1 business results with many bright spots, VPBank confident in 2023 growth target

At the end of 2022, many forecasts said that the banking industry in 2023 will face many challenges, leading to possible negative impact on profit growth. Many banks have set cautious business plans for 2023, but there are still a few banks that "go against the tide" with ambitious growth plans such as VPBank, which aims to increase profit after excluding extraordinary income by more than 50% in 2023. VPBank is showing caution but is still optimistic about the macroeconomic prospects in 2023 on the basis of increased capital and stable financial health.

Reality is supporting VPBank's optimism when in the first quarter of the year, with a bright spot from domestic consumption, the bank's consolidated credit balance was over VND503 trillion, in which individual banks achieved a growth rate of over 7% from the main growth drivers being the two strategic segments of individual customers (KHCN) and SMEs when the credit balance of the KHCN segment alone reached over VND200 trillion.

Along with that, mobilization from customers and valuable papers increased by nearly 12% compared to the end of 2022, contributing to ensuring liquidity and creating momentum for the bank's high credit growth target (over 30%). With a positive first quarter profit (the parent bank achieved over VND 4,100 billion in pre-tax profit), although challenges still exist, the level does not seem to be as serious as previous forecasts, especially in the context that policy makers will implement a series of measures to support economic growth with a focus on monetary policy as analyzed above.

Currently, according to VinaCapital, short-term deposit interest rates in Vietnam have peaked at the end of 2022 and the policy rate cut in March will create further momentum to reduce deposit interest rates. Therefore, in the second and third quarters, many bank deposits will mature and savers will have to choose to renew their deposits at lower interest rates (most deposits in Vietnam have 3-month and 6-month terms), helping banks' capital input costs to decline again.

This is considered one of the most positive factors affecting the operations of banks, as it not only reduces the pressure on the risk of narrowing net interest margins (NIM), but also lower deposit interest rates lead to gradually lower lending interest rates, helping to reduce the risk of increasing bad debt, while promoting faster credit growth by stimulating loan demand to increase again.

For VPBank, this is a “double benefit” as the bank has the basis to continue to maintain its leading NIM while its thick risk buffer with consolidated provisioning costs increasing by 55% in the first quarter will be offset by profits in the following quarters when the economy recovers positively, improving customers' debt repayment capacity, especially in the consumer finance segment.

With a solid business foundation and market share, coupled with the open potential of a market of nearly 100 million people, VPBank has grounds to believe in the recovery of FE Credit in the coming quarters of 2023 and the following years.

With the expectation that the economy will have positive developments thanks to the State's policies to support enterprises, the business prospects of banks are expected to improve in the following quarters when the challenges have gradually eased. VPBank, with its continuously expanding customer base and large capital base after the private placement, is expected to have positive growth in the coming quarters and achieve its set goals.

Source: https://www.congluan.vn/trien-vong-kinh-doanh-cua-vpbank-voi-diem-tua-tang-truong-kinh-te-vi-mo-post247396.html