Despite the impact of the Covid-19, two commercial banks with the highest proportion of medium and long-term loans in total outstanding credits in the system, including Vietnam International Commercial Joint Stock Bank (VIB) and Tien Phong Commercial Joint Stock Bank (TPBank). These two banks still recorded the significantly higher growth compared to the overall level, especially in the segment of credit.
The most surprising indicator is the Net Interest Margin (NIM) which shows the level of benefits from the difference between input mobilisation interest rates and output lending interest rates.
While NIM decline is the general trend of the banking industry in the context of interest rates falling sharply both in short terms (temporarily supporting customers to overcome the Covid-19) and in medium terms (under the policy of lowering interest rates of the SBV), the NIM of VIB and TPBank went up in the first two quarters of 2020.
In the analysis report on VIB’s shows that by the end of the accounting period in the second quarter of 2020, HCM City Securities Incarnation (HSB) emphasized that surprisingly the NIM ratio continued to increase by 0.08 percent compared to the previous quarter and by 0.12 percent compared to the beginning of the year, reaching 4.23%.
Meanwhile, according to calculation of Viet Capital Securities Company (VCSC), the NIM of TPBank increased from 4.08 percent in 2019 to 4.33 percent in the first half of 2020. VSCS said that the NIM growth of TPBank in the past six months is the highest level among the portfolios that VCSC keep tracks of until now.
Similarly, the indicator of interest income (reflecting the net revenue of credit segment) of VIB and TPBank maintained the sharp rise momentum, leading to a feeling that the Covid-19 has not significantly affected these two banks. Specifically, the interest income in the first six months of 2020 of VIB increased by 31 percent while that of TPBank was 25%.
At many banks which have announced the business results, this indicator recorded a noticeable slowdown trend due to the low credit growth, decline in lending rates and the debt restructuring under Circular 01/2020/TT-NHNN which does not allow the recognition of accrued interest.
The rise in NIM and interest income helped the net interest income from credit segment of the two banks soared, reaching 27 percent in VIB and 30 percent in TPBank.
Thanks to the revenue from the high credit growth, VIB and TPBank still achieved high pre-tax profit growth in the first half of the year, reaching respectively 29 percent and 26%, equivalent to 2.356 trillion dong and 2.034 trillion dong, respectively, despite the significant rise in operating expenses as well as the provisioning expenses for credit risks.
VIB and TPBank have the largest proportion of medium and long-term loans in the total outstanding loans in the system (according to data at the end of 2019). By the end of the second quarter of 2020, this proportion at VIB and TPBank was still very high at respectively 82 percent and 74%. They are most likely to continue being in the top three banks with the highest proportion of medium and long-term loans, along with Orient Commercial Joint Stock Bank (OCB).
In theory, medium and long-term loans are significantly riskier that short-term loans because the longer the loan period, the greater the probability of seeing an event, while there is also a risk of term difference. Thus, lending capital on long and medium terms always have high interest rates and large yields.
Another factor that helped VIB and TPBank recorded good profitability in the first half of 2020 is the very high credit growth of the two banks in last year (34 percent in VIB and 24 percent in TPBank), etc. In addition, since most loans are on long term of over one year, the revenue still remained in the first half of 2020 although the credit growth in the six months was low (6.7 percent in VIB and five percent in TPBank).
In addition, the volume of outstanding loans restructured under Circular 01 also has certain impact. The less the amount of restructured debts, the less influenced the accrued interests.
