Although domestic economic activities have resumed, the major partner economies of Vietnam are still affected by the Covid-19 pandemic, adversely impacting the business prospects of the banking industry.
The results of the survey on business trends of credit institutions (CIs) in the third quarter of 2020 of the Statistical Forecasting Department, the State Bank of Vietnam (SBV) has just announced that the June 2020 survey has recorded in two consecutive quarters, credit institutions reported a decline in business performance of the whole banking system, the overall risk level of customer groups, business and financial conditions of customers, and the demand of the economy for banking products and services dropped sharply.
In addition, the pressure of making provisions for high credit risks is expected to greatly affect the income and profit before tax of the banking system in 2020.
According to the results of the survey, in the second quarter of 2020, the credit system system has implemented an average discount of products and services to support customers facing difficulties due to Covid-19 disease. The trend of stabilising and reducing the price of products and services continues to be expected until the end of 2020. In particular, credit institutions assess that the price reduction is concentrated in reducing marginal interest rates more than reducing service fees.
Interest rates are expected to continue to decline
The CI system also forecasts that the mobilising and lending interest rates will continue to decline in the third quarter and the whole of 2020. In particular, credit institutions with a large market share in the market expect lower interest rates.
The liquidity of the banking system at the end of the second quarter of 2020 is assessed to be in a good state for both VND and foreign currencies. In the third quarter of 2020 and for the whole year 2020, 38-58 percent of credit institutions expect the liquidity of the banking system to continue to improve for both VND and foreign currencies.
Actual assessment of customer demand for banking services in the second quarter of 2020 increased slightly compared to the first quarter of 2020 (34.3 percent compared to 31.1%), much lower than the expectation in the previous survey (52%), the demand for payment services was identified as increasing more.
However, in the third quarter of 2020, customers’ demand for using products and services at the CI is estimated to grow again (58.1 percent of CIs expects to increase), in which demand for loans will continue to be higher (59.2 percent of CIs expected to increase while 6.8 percent of CIs expect to increase strongly) compared to 53.5 percent of the previous period. For other needs, 45 46 percent of CIs expect demand for payment services and deposits to increase compared to the previous quarter.
The overall risk level of customer groups in the second quarter of 2020 is considered to continue the increasing trend, with 25.5 percent of CIs perceiving the overall risk of existing customers at the quite high level.
The level of risk is likely to increase slightly in all customer groups, especially the group of customers who are joint stock companies, limited liability and private enterprises and customer groups of small and medium enterprises. In 2020, 52.4 percent of CIs are concerned that the overall risk level of customer groups will increase compared to the previous year.
According to the CIs, business and financial conditions of customers and demand of the economy for products and services are the two most important factors affecting the decline of business performance of credit institutions in the second quarter of 2020 and is expected to continue to impact the whole year 2020.
The survey results show that the comments of credit institutions on the trend of customer demand for banking products and services in the near future are the basis for them to make expectations about the growth of deposit and credit of their units.
Capital mobilisation for the entire CI system is forecasted to increase by an average of 3.1 percent in the third quarter of 2020 and by 8.3 percent in 2020. The expectation on capital mobilisation growth in 2020 tends to decrease over investigated periods and take place in all credit institution groups. Capital mobilisation for more than one-year term is forecasted to grow higher than deposit for terms of less than one year.
Credit institutions lowered the forecast on credit balance growth in 2020 in two consecutive surveys. Credit outstanding of the banking system is expected to grow by 3.5 percent in the third quarter of 2020 and increase by 10.5 percent in 2020, a sharp decline compared to the corresponding expectation of 13.1-14.1 percent of previous two surveys.
Business results in the second quarter of 2020 continued to decline more (26.4 percent of CIs stated declining compared to 16.4 percent with the same assessment in the previous period);
The proportion of CIs that stated that business results in this quarter was improved compared to the previous quarter, sharply reduced from 65.7 percent in December 2019 and 47 percent in March 2020 to only 32 percent at this survey.
However, 54.3 percent of CIs expected in the third quarter of 2020, business results improved better than in Q2/2020, besides, 15.3 percent were concerned about the decline of their performance.
The average expectation of the whole system on the growth of profit before tax in 2020 continues to be reduced sharply compared with the previous survey.
