FiinGroup has released a FiinPro Digest report evaluating the impact of Covid-19 pandemic on listed companies in the market, including commercial banks. Accordingly, in the first quarter (Q1) of 2020, the profit of listed banks grew by 3.4 percent over the same period of last year, but fell by 11.5 percent compared to Q4 2019. This is the largest reduction since Q2 2018.
Customer loans at the end of Q1 2020 of 18 listed banks only increased by one percent, much lower than the same period of the last two years (4.2 percent in 2018 and 3.4 percent in 2019), and lower than the average level of the industry in the first three months of 2020 (1.3%). The Net Interest Margin (NIM) of 18 listed banks slightly fell by 1.1 basis points compared to Q1 2019 to 0.87%.
Some banks saw good NIM improvement in Q1 2020 but mainly small banks, including Kien Long Commercial Joint Stock Bank (KLB, up from 0.26 percent to 0.62%), Saigon Thuong Tin Commercial Joint Stock Bank (STB, up from 0.45 percent to 0.72%), while some banks recorded significantly NIM reduction, such as National Citizen Commercial Joint Stock Bank (NVB), Saigon Hanoi Commercial Joint Stock Bank (SHB).
The highest NIM belonged to banks with large consumer finance segment, such as Vietnam Prosperity Commercial Joint Stock Bank (VPB, 2.27%), HCM City Development Commercial Joint Stock Bank (HDB, 1.37%) and Military Commercial Joint Stock Bank (MBB, 1.22%). However, the NIMs of these banks were all lower than Q4 2019.
With low credit growth and slight decline in net profit margin, the net interest income of 18 listed banks only increased by 04 percent compared to Q4 2019. However, compared to Q1 2019, the net interest income of banks has grown by13.6%. Except for Vietnam Thuong Tin Commercial Joint Stock Bank (VBB) which experienced interest income decline of 3.8 percent over the same period of last year, other banks all recorded growth. Some banks with high growth in interest income are HDB (42.1%), NVB (35.7%), Vietnam International Commercial Joint Stock Bank (VIB, 29.9%), SHB (24.5%), Vietnam Technological and Commercial Joint Stock Bank (TCB, 22.8%), Asia Commercial Joint Stock Bank (ACB, 19.7%), VPB (18.2%). Compared to Q1 2018 and Q1 2029, banks’ net interest income in Q1 2020 was much lower than both the same period and the previous quarter.
The net interest income from credit still accounted for 78 percent of banks’ income structure.
The growth of income from service activities in Q1 2020 fell by 21.6 percent over Q4 2019. In addition to banks’ fee cuts to share difficulties due to the Covid-19 pandemic, a trend can be seen that in the past two years, this income both fell in Q1 compared to the previous quarter after sharply strongly went up in Q4 2019. TCB and STB contributed the most to this trend when their net income from services grew very high in Q4 2019 and significantly fell in Q1 2020.
However, compared to the same period of last year, the net profit from service activities of banks in Q1 2020 still rose by 11.4%, but it is the lowest quarterly increase since Q1 2018. The profit from other business activities (securities trading, foreign currency trading, etc.) increased by 32.4 percent over the same period of 2019 but dropped by 24.6 percent compared to the previous quarter. The proportion of net profit from service activities and profit from the remaining activities just accounted for respectively 9.8 percent and 12.2 percent in the total income of banks 0 the lowest since Q3 2018, and is expected to continued being affected in the next quarters. The reason is that banks have lowered fees to support customers.
According to FiinGroup, in 2020, the profit of 18 listed banks will fall by 11.9 percent due to the impact of Covid-19 pandemic.
FiinGroup’s report pointed out that the bad debt ratio of 16 listed banks increased from 1.44 percent in late 2019 to 1.65 percent in Q1 2020.
Six out of 18 listed banks have published explanation for VAMC (Vietnam Asset Management Company) bonds with total outstanding credit of over 4.85 trillion dong, down from six trillion dong in late 2019. This reduction is thanks to the reduction in outstanding VAMC bonds in Export Import Commercial Joint Stock Bank (EIB) from 4.43 trillion dong to 3.28 trillion dong. The remaining banks included HDB, Bac A Commercial Joint Stock Bank (BAB), Lien Viet Post Commercial Joint Stock Bank (LPB), VBB, and VIB.
In addition, some listed banks provided explanation on outstanding VAMC bonds in late 2019 but not in Q1 2020. Except for Commercial Joint Stock Bank for Investment and Development of Vietnam (BID) which announced to clear off bad debts at VAMC in March 2020, the remaining banks still had fairly big bad debts such as STB, Commercial Joint Stock Bank for Industry and Trade of Vietnam (CTG), and SHB.
In Q1 2020, the rate of creating new bad debts of 16 listed banks was 0.23%, significantly up compared to the previous seven quarters, equivalent to the level in Q1 2018.
According to Circular 01/2020/TT-NHNN, banks can decide to reschedule and maintain the debt group for customers affected by the Covid-19 pandemic. From January 23rd to March 28th 2020, banks have restructured the repayment term for over 12,000 customers with an outstanding credit of 13.5 trillion dong.
Thus, without this restructuring, the rate of creating new bad debts in Q1 2020 will be higher. This will be similar in the following quarters, when the restructured outstanding credit has reached nearly 138 trillion dong as of May 12th 2020.
