Moody’s said that the Vietnamese banks ranked by this rating agency have had higher profitability thanks to the increase in net interest margin and lower credit costs. The asset quality of those banks has also improved since they use profits to make provisions and handle previously incurred bad debts.
Specifically, the banks that were rated by Moody’s have achieved higher profitability over total assets ratio in the last two years, from 0.9 percent in 2017 to 1.1 percent in 2018. Net income of banks increased by 35 percent to 70 trillion dong (about $3 billion) in 2018 despite of limit in credit growth.
“In 2019, rated Vietnamese banks will achieve higher rate of return, still thanks to the growing gap between lending rates and deposit rates and lower credit costs,” Rebaca Tan, an analyst at Moody’s, said.
Rebaca Tan added, “credit growth will remain stable since the State Bank of Vietnam is controlling more strictly and asset quality will be improved further, as banks continue to clean up their balance sheet “.
The capitalisation of banks will also be strengthened by improved profitability and stable credit growth.
However, most banks will still lack capital to meet the stringent requirements of the Basel II standard effective from 2020. Therefore, capital mobilisation, mainly from foreign investors will be the focus of banks in 2019 as Vietnam’s capital market is still not fully developed.
Moody’s also pointed out that, although the financial health of banks has improved, the fierce competition to attract private investments will make banks more difficult to raise capital in 2019.
