Covid-19 severely impacts banking sector’s benefit growth hinh anh 1Illustrative image

Hanoi (VNA) - According to the second-quarter financial report, in general, the business results of the banking sector were negative due to the developments of the COVID-19 pandemic from March. 

Analysts of SSI Securities Corporation calculated that the impacts of the disease on the business results of most banks in the first quarter was not great, except for some banks that chose to actively set up a credit risk provision in advance to have more reserves in the future.

However, in the second quarter, incomes from interest, fees and bad debt collection of the banking sector will decrease when meeting customers’ demand through the provision of preferential interest rate packages and cutting transaction and payment costs.

Credit growth slowed down

The SSI report has also reduced the pre-tax profit forecast for banks compared to previous forecasts.

Specifically, when looking at the base scenario forecasting control of the disease by the end of the second quarter with the worst-case scenario being the end of 2020, the bank's profit before tax will have a corresponding growth of 7.2 percent per year and 0.8 percent per year.

“The difference between the base case and the worst case scenario will be clearer in the bank's business results in 2021. “We anticipate at that time the ratio of bad debt formation will be higher. Bad debt increase may stem from the global COVID-19 outbreak,” said Hoang Viet Phuong, director of SSI Investment Analysis and Consultancy Center.

According to a report from the General Statistics Office, credit growth in the banking system of Vietnam in the first quarter recorded a modest growth of 0.68 percent per year.

SSI statistics also indicate that this is the lowest level in the 2015-2019 period, at that time, credit growth ranged from 1.25 percent to 2.81 percent.

In the market, credit growth of VCB, CTG, BID, MBB and ACB are slowing down. Phuong explained that this may stem from the fact that these banks become cautious in disbursing new loans to limit credit risks in the future.

But in another development, VPB, HDB and TPB broke the model and posted a high rate of credit growth with TPB recording 4.8 percent and HDB, 5 percent  (by the end of February) and 9 percent at TPB (by the end of March).

Regarding consumer credit, SSI experts calculate that the influence of COVID-19 will take place in two phases. In the first phase, the demand for loans from middle and low-income customers remains to meet the cost of living. With the second phase, when the epidemic is complicated and reaches its peak, in theory, the income of the affordable customer segment will be affected first, so the ability to repay debts of this customer group will decline rapidly.

Influence from institutional customers

In addition, in order to support customers affected by the COVID-19 epidemic, the State Bank of Vietnam issued Circular 01, dated March 13 on the structure of credit institutions, branches of foreign banks rescheduling, exempting, reducing interest rates, fees, keeping the debt groups.

Accordingly, banks have expanded the preferential loan packages to support businesses. However, each bank has announced a separate support loan package for corporate and individual customers.

Following the package, the Government meeting with representatives of 20 banks came to the agreement that the industry will expand the supplementary credit package for customers because of the urgency of the current situation. In addition, the Government will provide banks with various forms of support, including cutting interest rates and short-term deposit interest rates, and reducing 50 percent of interbank transaction fees (Circular 04/2020) and extended the tax payment time (the draft revision of the decree is being proposed). Added to this, banks were also asked not to pay cash dividends to retain income from the previous year to support the economy.

From an investment perspective, experts believe that ACB and VCB now have a cautious strategy to overcome the pandemic while possessing good asset quality among banks. From there, they expect the two banks to continue to perform well during this difficult period./.