Year-end profits put heavy pressure on banks

In the most updated report, VPBankS Research forecast that the pre-tax profit of the banking sector for 2024 would reach VND293.649 trillion and now listed banks have completed 74.3 percent of their business back-up plans, despite impacts from the Yagi typhoon.

Looking upon the banks’ profit picture in the third quarter, VPBankS Research said that pre-tax profit of listed banks was VND70.143 trillion, up 18% over the same period and exceeded expectations. Some unexpected variables showed ABBank lost VND343 billion, HDBank grew 43% year on year and Techcombank had better net interest income results than expected. Notably, the only major banks that completed their business plans on schedule were: HDBank, SHB, Sacombank and Techcombank.

The entire banking sector still achieved a high pre-tax profit level in the 3rd quarter of 2024

“The entire banking sector still achieved a high pre-tax profit level because large banks, such as BIDV, Vietinbank, MB, Vietcombank all achieved over 70% of their business plans and the pre-tax profit business plans of the 8 largest private banks also reached an average of 72.2%,” VPBankS Research evaluated.

The bank with the lowest pre-tax profit business plan now is An Binh Bank (ABBank) when it only completed 18% and recorded a loss of 343 billion in the third quarter. On the contrary, the bank that can leisurely “reach the finish line,” as it has completed the best business plan at 95% is KienlongBank, but the scale of this bank in the banking sector is small.

The two leading retail banks, VIB and VPBank, both recorded completion of only 55% and 60% of their business plans, respectively. This shows that retail credit has not yet fully recovered and competition in the retail segment is increasingly fierce.

Regarding the growth trend of net interest income, the research team found that due to more positive credit growth and more attractive costs of capital, most banks have recorded growth compared to the same period last year. However, when looking at NIM (Net Interest Margin), it can be seen that the competition is even fiercer in the sector when most banks have reduced NIM compared to the same period and the reduction is seen in both the state-owned and private banks, not just in private banks as before.

“This shows that the banking sector may be entering a saturation cycle when interest rates in Vietnam will maintain at the current level, so it is very important for banks to diversify income sources apart from their interests,” VPBankS emphasized.

When looking at the credit growth statistics for the third quarter, the analysis team also found that some banks have slowed down in credit growth, when they enjoyed robust growth in the first half but now lack growth motivation even though there’s now more room for credit growth.

Meanwhile, small private banks such as TPBank, BVBank, VIB, and Nam A Bank have grown very strongly. Most banks will have their credit room expansion to about 18% and may be further expanded in the last month of this year.

According to the latest statistics from the State Bank of Vietnam (SBV), as of November 22, 2024, the total credit volume in the system had increased by 11.12 percent compared to the end of 2023, which means there is still 3.88% left to boost in the last month of the year. This is still a challenge, but hope can be based on the need to rebuild life after Typhoon Yagi and export orders for the new year or new FDI capital flows from comprehensive strategic partners after business trips of senior government leaders. Therefore, the VPBankS Research team maintains the 2024 credit growth forecast at 14.83% compared to the end of 2023.