Bank profits are forecast to slow this year due to reduction in income from interest of loans and net profit margin (NIM) ratio. (Photo: dautucophieu.net) Hanoi (VNS/VNA) - Profitgrowth of Vietnamese banks in 2019 is forecast to be lower than last year, butexperts say this should not be cause for concern.
Analysts from the Viet Dragon SecuritiesCompany (VDSC) say despite the dip compared to 2018, results are stillpositive.
In a banking industry report releasedrecently, analysts attributed the slowdown to reduction in income from interestof loans and net profit margin (NIM) ratio.
According to the report, the NIM ratiowill decline due to the pressure for banks to raise medium and long-termcapital to meet a State Bank of Vietnam’s strict regulations.
Those regulations have seen a reduction inthe ratio of short-term capital used for medium- and long-term loans from 45percent to 40 percent from early 2019 and raising the capital adequacy ratio toprepare for applying international banking standards Basel II from early 2020.
The NIM reduction was also forecast as theproportion of retail outstanding loans at banks is high and competition inretail lending increasing.
Another factor is that banks’ provisionexpenses for risky loans continue to be high, especially in banks, such asBIDV, Vietinbank, VPBank, TPBank and HDBank, whose non-performing loans arestill kept at the Vietnam Assets ManagementCompany (VAMC).
According to VDSC, banks’ profitabilitywill be also affected adversely as banks’ irregular non-interest income,including from the signing of life insurance contracts and divestments, will beno longer abundant as previously.
The VDSC analysts also forecast localbanks will face risks in 2019.
Consumer finance is a business segmentthat shows saturation in demand that makes loan growth difficult. It willincrease the competition and difficulties in the business segment if there arenew entrants to take part in the market and the competent authorities tightenmanagement regulations on the segment.
As the proportion of retail outstandingloans continues to increase, in which the housing loans are still dominant,banks would face more risks if the real estate industry falls into a downwardcycle, according to the report./.
