Bao Viet Securities Company (BVSC) has released a report on the prospects of Commercial Joint Stock Bank for Foreign Trade of Vietnam (Vietcombank) in 2020, which emphasized the bank’s ability to resist shocks against economic fluctuations, initially the Covid-19 epidemic.
As of March 4th 2020, 23 credit institutions (CIs) reported to the State Bank of Vietnam (SBV). Accordingly, about 926 trillion dong of outstanding loans are affected by the Covid-19 epidemic, accounting for 14.3 percent of the credit balance of these 23CIs and 11.3 percent of the industry’s total outstanding credit. The outstanding loans hit by the Covid-19 epidemic of state-owned banks are about 600 trillion dong.
Vietcombank estimated that the outstanding loans of existing loans entitled for interest reduction are about 30 trillion dong (accounting for four percent of Vietcombank’s outstanding loans and seven percent of the outstanding loans for corporate customers). The interest reduction is about 300 450 billion dong. In addition, CIs have set up a credit support package with a total value of 285 trillion dong, and the average interest rate reduction is 0.5 one percent.
BVSC assumed that if Vietcombank’s supported outstanding loans account for about 20 percent of the total outstanding loans, the output interest rates may fall by 0.2 0.3 percent per annum. In addition, BVSC also forecasted that the bad debt ratio of Vietcombank in 2020 will increase by one percent.
Compared to the previous report, BVSC has adjusted that Vietcombank’s one off earnings from the banca agreement with FWD will be divided evenly in five years instead of two years. In addition, the bank’s Net Interest Margin (NIM) will be 3.13 percent instead of rising by 10 basis points as previously forecasted. Excluding the impact of extraordinary income, Vietcombank’s pre-tax profit is predicted to grow by 17.2%.
In general, BVSC still highly appreciates Vietcombank’s medium and long-term prospects by saying that the bank has plenty of room for profit growth, along with good shock resistance to adverse economic developments. However, the analysis team also noted the risks to Vietcombank when the economic movements get worse and Vietcombank does not issue shares to increase capital in 2020.
