Can Van Luc, and the authors of Joint Stock Commercial Bank for Investment and Development of Vietnam (BIDV)’s Training and Research Institute, had just published a report assessing the impact of Covid-19 on the income of the banking industry.
Preliminary calculations by the authors suggested that the operating revenue of credit institutions in 2020 was expected to decrease by at least 30 trillion dong to 34 trillion dong, equivalent to 20 percent to 25 percent of the original profit plan.
The effects of the Covid-19 pandemic on the banking industry this year included both direct and indirect. In which, the immediate results due to the implementation of policies to support the economy involved (i) reducing interest rates by 0.5 percent to 1.5 percent on existing loans affected by pandemics and needed restructuring (according to the State Bank of Vietnam (SBV) at about 2 quadrillion dong); (ii) reducing interest rates from 1 percent to 2.5 percent per year for new loans (total size of credit packages credit institution committed providing new loans of up to 600 trillion dong); (iii) debt restructuring, debt group remaining and interest-free policy; and (iv) exemption or reduction of remittance, payment, etc.
As a direct impact, experts of BIDV Training and Research Institute believed that the total income of credit institutions in 2020 would decrease from 17.722 trillion dong to 21.828 trillion dong. In which, the impact from the reduction of interest rate from 0.5 percent to 1.5 percent on existing loans was about 11.475 trillion dong; income reduction due to lower interest rates from new loans (credit package of over 600 trillion dong) was from 2.43 trillion dong to 6.075 trillion dong. The impact of restructuring the debt, keeping the debt group and excluding the interest and penalty could result in a decrease in income of up to 3.5 trillion dong. Finally, the exemption and reduction of remittance fees and payments could reduce the income from 317 billion dong to 778 billion dong.
On the other hand, the indirect impact factors due to difficult business activities included reducing interest income due to low credit growth and increasing provision for credit losses due to rising bad debts. These impacts, calculated by the experts’ group, could reduce the bank’s income by 12.268 trillion dong. In which, reducing interest income due to low credit growth would be about 5.532 trillion dong while increasing provisioning might reduce income by about 6.736 trillion dong.
