Low credit growth, reducing profit put pressure on bank prospects in 2023

TPBank’s transaction office in Hà Nội. Most of small-sized banks, including TPBank, set a profit growth target of only 10-15 per cent in 2023, much lower than the growth rate of 32-35 per cent in the 2021-22 period. Photo TPBank

HÀ NỘI — The outlook for the banking industry this year will not be as bright as previous years due to low credit growth and reducing profit, experts forecast.

In a recent report, VPBank Securities Company (VPBankS) forecast that pre-tax profits of the entire banking industry will slow in 2023 with a growth rate of about 10-12 per cent.

According to the experts, there will be a significant difference in profit prospects among groups of banks. In which, the group of small-sized banks may experience a sharp decline in profit growth in 2023. In fact, this slowdown is also reflected in the banks’ 2023 business plans. Most of them set a profit growth target of only 10-15 per cent in 2023, much lower than the growth rate of 32-35 per cent in the 2021-22 period.

Under the report, the experts forecast credit growth of the entire banking industry in 2023 will be at 12-14 per cent.

In the first half of 2023, credit growth of the industry was lower than the same period last year due to high lending interest rates. The experts expect in the second half of the year, the move from the State Bank of Vietnam will help lower lending rates and improve credit growth of the industry.

The experts said net interest margin (NIM) of all banks, except Sacombank, declined in the first half of 2023 due to high cost of fund (COF) and reducing current account savings account (CASA). However, the experts forecast NIM will improve in the third and fourth quarters of 2023 thanks to supportive policies from the Government.

The report also showed banks’ bad debt in the first half of 2023 increased due to the freezing of the real estate market and the poor financial health of corporate and individual borrowers under a high interest rate context.

Bad debts of most listed banks increased sharply in the first half of the year while the loan loss reserve (LLR) decreased from 143 per cent to 99.4 per cent.

Experts believe the profit growth prospects of listed banks depend greatly on asset quality control.

With the expectation that the macroeconomic situation will start to get brighter in the last quarter of 2023, the experts believe that the bad debt of the whole banking industry in the third quarter of 2023 will be equivalent to the second quarter and will have an improvement in the fourth quarter of this year.

With the Government’s policy support, including the issuance of Circular 02, the bad debt rising pressure will be postponed until the end of the first half of 2024 to give both banks and borrowers time to restructure and gradually handle the debts, according to the experts.