The banking and finance sector has also been significantly affected by the Covid-19 epidemic from the beginning of the year. However, closing the first quarter (Q1) of 2020, the business indicators of many banks still increased.
The net interest income was impacted.
To support the economy in general and businesses in particular in the Covid-19 developments, interest rate is the factor that has been considered the most, when many guidelines of the State Bank of Vietnam (SBV) are prioritising the use of all resources so that banks can exempt or reduce interest rates for affected customers.
So far, banks have used a considerable amount of credit for lending at preferential interest rates to support businesses to maintain their business and production activities, overcoming difficult period. The interest rate cut reaches up to three to four percent per annum for now loans, and some banks have even offered higher interest rate reduction such as Nam A Commercial Joint Bank (NamABank), Tien Phong Commercial Joint Stock Bank (TPBank), HCM City Development Commercial Joint Stock Bank (HDBank) and Commercial Joint Stock Bank for Foreign Trade of Vietnam (Vietcombank).
However, customers’ demand for credit could hardly rise strongly in Q1. At the same time, banks focused on restructuring and rescheduling debts for customers affected by the epidemic. That is the reason for the deep fall of banks’ credit growth and NIM in Q1, which affected their profits.
The Q1 net profit of Vietnam Thuong Tin Commercial Joint Stock Bank (VietBank) dropped by 3.8 percent compared to the end of last year. By the end of March, the net interest income of Saigon Commercial Joint Stock Bank for Industry and Trade (Saigonbank) also fell by five percent over the same period of last year. At large-scaled banks like Vietcombank, in Q1, the net interest income only grew by 6.29 percent compared to the same period of 2019, reaching 9.034 trillion dong. The main reason is that the bank had to lower lending interest rates to share difficulties with customers.
However, the business indicators of NamABank still recorded good growth compared to the beginning of the year. Particularly, the bank’s mobilisation on market 1 increased by 8.3%, outstanding loans to market 1 were up by 4.7%, total consolidated assets grew by 3.7%, etc.
According to the Q1 consolidated financial report of NamABank, in the first three months of 2020, NamABank’s total assets were 98.197 trillion dong, up by 3.509 trillion dong (3.7%) over 2019, completing 85 percent of the plan. The bank’s mobilisation on market 1 was 81.4 trillion dong, up by 6.243 trillion dong (8.3%) over 2019, completing 88 percent of the plan. Particularly, many of the bank’s indicators sharply increased compared to the same period of 2019. For example, the consolidated foreign exchange trading revenue was 14.4 billion dong, up by 12.3 billion dong (577%).
Thus, after the first quarter of the business year in 2020, many business indicators of NamABank such as total assets, capital mobilisation, outstanding loans, etc. have nearly completed 90 percent of the set plan, while the bad debt ratio is controlled below three percent as required by the SBV.
Although the business indicators in Q1 2020 all recorded good growth, due to the decrease in net interest income, the bank’s profit in the period halved. Accordingly, its consolidated pre-tax profit in Q1 2020 was 143 billion dong, less than the same period of 2019, but still completing 18 percent of the plan.
The decline in net interest income in particular and pre-tax profit in general compared to the same period of 2019 is a common problem of the banking and finance industry in Q1 2020. In the current situation, NamABank has been complying with Circular 01/2020 of the SBV on debt restructuring and interest reduction and exemption for customers who are borrowing at the bank.
Following the prime minister’s instruction, and policies of the SBV, NamABank has implemented many financial solutions to support customers hit by Covid-19 epidemic, including preferential interest rates. most recently, the bank has launched a financial solution package worth up to 15 trillion dong to support customers affected by the epidemic, droughts and saltwater intrusion in the Mekong Delta region. This package includes refinancing, debt restructuring, and especially interest rate reduction of up to 3.1 percent per annum compared to the current interest rates.
Not long ago, NamABank quickly joined the lending rate decline for customers hit by the Covid-19 pandemic. Specifically, the bank offers a preferential interest rate of up to two percent for individual and corporate customers operating in the fields of agriculture, accommodation, restaurants and import-export (between Vietnam and countries in the epidemic area). The programme is applied from March 20th until the government announces the end of the pandemic.
Individual customers who need to borrow money to serve consumer purposes, car purchase, land/house purchase or construction, home repair will also be offered a preferential interest rate cut of up to 3.1 percent per annum, under the “Happy Finance” programme which is implemented from March 16th to June 30th 2020. In addition, the support credit programmes for agriculture and rural development and Happy Lade product packages are being applied interest rate reduction of up to one percent per annum.
This partly explains why NamABank’s consolidated outstanding credit on market 1 reached 70.694 trillion dong, up by.3148 trillion dong (4.7%) over 2019, but interest rates from lending activities in Q1 2020 fell by 29 percent to over 464 billion dong.
In the coming time, the global economy is forecasted to continue to be affected by the pandemic, NamABank said that it will continue to cut operating costs, deploy more new programmes to support customers in terms of capital and interest rates.
This may affect the bank’s profits in the next quarters, but according to NamABank, it will still drastically carry out financial solution package to accompany customers through this difficult period. At the same time, the bank will also continue to accelerate digitalisation, increasing convenience, safety for customers conducting online transactions, etc.
