The results of the survey on business trends of credit institutions (CIs) in the fourth quarter of 2019 recently released by the Forecasting and Statistic Department of the State Bank of Vietnam (SBV) showed that banks are still positive about their business prospects but the level has decreased.
Specifically, only 76.5 percent of CIs said that the business situation in the third quarter of 2019 improved better than the second quarter, of which 20.6 percent saw much improvement. In the previous survey, up to 85.4 percent of CIs expected the business situation to be improved in the third quarter. Notably, the rate of CIs expecting the overall business situation in 2019 to be better than 2018 also declined to 87.1 percent from 88.5 percent of the previous survey.
One of the reasons for the reduction in optimism level of CIs was the slowdown of credit growth in the recent time. As of September 24th 2019, credit only increased by 8.64 percent over the beginning of the year.
According to Saigon Securities Incorporation (SSI), the actual credit growth in the first nine months of the year will be higher than the above figure. For example, in 2018, the credit growth by the end of the third quarter was 10.33 percent, up to 0.81 percentage point higher than the number announced on September 20th 2018. However, even if the disbursement was promoted in the last three working days of September (starting from September 24th 2019), the credit growth in the first nine months of 2019 is expected to be just around nine percent the lowest level compared to the same period in the last four years.
SSI’s calculation pointed out that the total credit disbursement in the third quarter of 2019 was estimated at about 120 trillion dong much lower than the 226 trillion dong and 305 trillion dong respectively recorded in the first quarter and second quarter of 2019.
Not only that, the survey results of the SBV also showed that CIs only expected the outstanding credit to grow at an average of 4.85 percent in the fourth quarter and 13.61 percent in the whole year 2019, down by 0.72 percentage point compared to the average expectation of 14.33 percent recorded in the previous survey, and also lower than the actual growth of 13.88 percent in 2018. Notably, CIs have adjusted the growth of outstanding credit in 2019 down from 15.27 percent in the beginning of the year to 13.61 percent.
Despite the slow credit growth, the capital mobilisation developed well in the third quarter of 2019, after being lower than the credit growth in the previous two quarters and lower than the same period of 2018. Specifically, as of September 24th, the capital mobilisation of CIs increased by 9.03 percent over the end of 2018, Not only the mobilisation increased at a higher rate, the average deposit rate was also higher with real positive interest rate sharply rose from about 3.4 percent per annum in 2018 to 4.8 percent per annum in September 2019.
Differentiation in profit achievements
Nguyen Duc Hung Linh, director of Analysis and Investment Advisory for Individual clients of SSI said that while the credit output is still weak and the deposit rate level is higher, the profit picture in the third quarter of 2019 of banks can hardly be the same as the previous quarter”.
However, the reality seems to be different. Although only a few banks have announced their business results in the first nine months of 2019, all the numbers are positive with strong rise in profit compared to the same period of 2018.
Tien Phong Commercial Joint Stock Bank (TPBank) is the first bank to announce the nine-month business results with pre-tax profit reaching up to 2.404 trillion dong, completing 75 percent of the year’s profit plan. This shows that TPBank’s pre-tax target of 3.2 trillion dong in 2019 is entirely feasible, although this target is 42 percent higher than 2018, while the bank only aims to expand credit by 20 percent this year.
Saigon Thuong Tin Commercial Joint Stock Bank (Sacombank) has also announced to attain 2.491 trillion dong of pre-tax profit in the first nine months of 2019, up by 89.5 percent over the same period of last year. With this result, Sacombank has completed up to 94 percent of its profit plan in 2019 just in the first three quarters of this year. Particularly, Sacombank’s credit growth room in the last months of the year is still very large as its credit has only grown by 13.1 percent over the beginning of the year, while Sacombank received approval of the SBV to increase credit growth to 17 percent.
However, taking the lead in profit is probably still Commercial Joint Stock Bank for Foreign Trade of Vietnam (Vietcombank) when the pre-tax profit in the first three quarters of 2019 reached up to 17.592 trillion dong, up by 50.6 percent compared to the same period of last year, completing 85.8 percent of the 2019 plan. Particularly, Vietcombank’s credit only grew by 11.6 percent in the same period, while its target in the whole year is 15 percent.
These are clear evidences showing the strong differentiation in banks’ operations at the current time. While the Net Interest Margin (NIM) of large banks, particularly state-owned banks, has been positively improved thanks to the non-term deposits of large economic organisations, the situation is more or less opposite in small banks with the increasing deposit rate level.
