According to the General Statistical Office, banking activities in the first quarter of 2020 were negatively affected by the Covid-19 epidemic. As of March 20, 2020, the total new means of payment increased by 1.55 percent compared to the end of 2019 (the same period last year it increased by 2.54%); capital mobilisation of credit institutions increased by 0.51 percent (by 1.72 percent in the same period in 2019); credit of the economy increased by 0.68 percent (by 1.9 percent in the same period in 2019). Particularly, the credit figures showed that businesses faced many difficulties, had to narrow their production and business activities and the need for borrowing significantly reduced.
It can be seen that the serious impact of Covid-19 on the economy in general and the banking industry in particular was immediately ahead. According to many banks, this year’s business plan will have to be revised. Some are still considering the situation, because the target submitted to the Annual general Meeting of Shareholders (AGM) will also be delayed until June because of the Covid-19 epidemic. Meanwhile, some have calculated and accepted the possibility of negative growth this year.
Nam A Commercial Joint Stock Bank (Nam A Bank) has revealed some business plan targets in 2020, though it has not organised the AGM yet. Notably, the bank expects loan balance to increase by 21.4%, but the consolidated pre-tax profit is only 800 billion dong, down 13.47 percent compared to 2019. Total assets are expected to increase by 22.51%, capital mobilisation grows by 22.41%, the number of credit cards increases by 34.56%, bad debt ratio is below three percent. Recently, Nam A Bank also informed shareholders about the postponement of the AGM (should be on March 28) due to force majeure related to the disease.
Meanwhile at Joint Stock Commercial Bank for Investment and Development of Vietnam (BIDV), the bank has set a target of consolidated profit before tax of 2020 to reach 12.5 trillion dong, but that is in case the disease only lasts until the end of March. The bank’s management shared that considering the current situation, business plan might have to be adjusted. In the first two months of 2020, capital mobilisation of the bank decreased by 1.6 percent while outstanding loans reduced by nearly two percent.
In the newly released annual report, Military Commercial Joint Stock Bank (MB MBBank) also showed that its business goals in 2020 were really a big challenge in the context of the global economic crisis. However, bank management is working hard to find opportunities in this difficult context.
Therefore, in order to support businesses and maintain business, banks are on the strong path, launching credit packages with many incentives and low interest rates to reduce the negative impact, at the same time, to break out when the epidemic is over.
In early March, the State Bank of Vietnam (SBV) said that commercial banks had registered to develop when the preferential credit support package had interest rates of 0.5-1.5 percent with a total value of about 285 trillion dong. At the same time, banks consider reducing interest rates on existing loans with interest rates reduced from one to three percent, exempting penalty interest, and reducing fees for banking services.
With Circular 01 recently issued by SBV, commercial banks have a basis and guideline to structure the repayment term for customers affected by Covid-19 epidemic.
According to the director of the Credit Department of Economic Sectors, the support credit package may increase, but depends on the ability of banks to balance their finances. Some banks also consider raising the size of this preferential credit package. For example, Joint Stock Commercial Bank for Foreign Trade of Vietnam (Vietcombank) initially expected a loan balance of 78 trillion dong for affected customers. However, due to the complicated disease situation, Vietcombank considers expanding to 120 trillion dong.
Decreasing lending interest rates, banks’ NIMs may be reduced. Again, in the context of difficult credit growth because the business activities of enterprises are stalled, it is clear that interest income will be affected. Meanwhile, in the service sector, banks have recently exempted and reduced a number of online transaction fees for customers.
MBS’s analysis said that economic growth slowed down by the Covid-19 epidemic, which would damage the quality of assets and reduce the profits of banks. For example, real estate prices might fall, causing great losses to the loans with real estate collaterals.
As observed, a number of banks have restructured their personnel and remuneration policies to minimise operating costs and ensure profits.
Not only profit plans but other plans such as raising capital, offering shares, listing on the stock exchanges of banks are also affected. The first quarter has passed but the capital increase with the budget for VietinBank and Vietcombank with the scale of about 10 trillion dong has not made any move yet. Meanwhile, in November 2019, MSB submitted its first listing registration document to the Ho Chi Minh Stock Exchange (HOSE), but so far no new information has been released.
