Gradually revealing the profits of banks in the first half of the year

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Many banks have announced or forecasted 6-month business results. Photo: Internet

There will be high profits

The domestic economy recovered well in the first six months of 2022 when GDP in the second quarter of 2022 increased by 7.72%, the highest quarterly increase in the past 10 years.

The booming economy helps businesses return to work, pushing up credit demand.

According to the State Bank of Vietnam (SBV), by the end of June 30, the credit of the whole economy reached VND11.4 quadrillion, up 9.35% compared to the end of 2021 and higher than 6.9% of the same period last year. With this increase, banks are forecast to gain money from credit activities, along with a large source of income from non-interest business activities, while the pressure of risk provisioning decreases.

According to a report by Yuanta Securities Company, the profit after tax of the parent bank of 27 listed banks is likely to increase by up to 36% compared to the same period last year.

In particular, Yuanta estimates that net interest income from credit activities in the second quarter of 2022 will increase by 14% compared to the same period in 2021, a lower increase than in the first quarter of 2022 because most banks have exhausted the credit growth limit (room). Moreover, fee income in the second quarter of 2022 is estimated to increase by 5% compared to the same period last year, in which, revenue from bank assurance may be low due to less active lending activities. In addition, operating costs are estimated to increase by about 15%.

According to Vietcombank Securities Company (VCBS), the proportion of retail credit in listed banks has increased from 31% in 2015 to 45% of total outstanding loans at the end of the first quarter of 2022, of which home loans, car purchases, and consumer finance all recorded positive increases.

Many banks have also estimated that profits in the first half of the year could increase by tens of percent, even equaling the same period in 2021. A representative of Vietcombank said that in the first five months of the year, the bank's profit growth rate was 30%. Credit recovered strongly while demand deposits (CASA) continued to increase, helping Vietcombank achieve high profit growth. Similarly, a representative of Eximbank's leadership also estimated that in the first half of this year, Eximbank achieved about VND1,800 billion in pre-tax profit, an increase of 2.7 times over the same period last year.

TPBank's latest announcement said that profit in the second quarter of 2022 reached nearly VND2,200 billion, an increase of nearly VND600 billion, equivalent to an increase of nearly 34% compared to the first quarter of the year, helping to bring accumulated profit to 30 June 2022 to VND3,788 billion, up nearly 26% over the same period last year. TPBank's total operating income reached VND8,165 billion, up 31% over the same period.

Bright prospects

The report on investigation results of the Department of Forecast and Statistics (SBV) shows that, according to credit institutions, the business situation in the second quarter of 2022 continues to have a better improvement than in the previous quarter.

Therefore, 80.7% of credit institutions expect their business to improve in the third quarter and the whole of 2022. So in 2022, 87.7% of credit institutions expect positive growth in pre-tax profit, compared to 2021.

But reality shows that the growth prospects in the last six months of the year depend on the credit room that the SBV will grant. VCBS forecasts that the State Bank will grant a credit room to banks at the beginning of the third quarter of 2022, but Yuanta's report suggests that the SBV may move the allocation to August to continue monitoring inflation.

However, like in previous years, the group of banks with high capital adequacy ratio (CAR), low bad debt, good risk management model (compliance with Basel II, Basel III, IFRS 9 standards), performed the responsibility to support the economy (exemption and reduction of interest rates and fees, participating in the restructuring of 3 "VND Zero" banks, namely OceanBank, GPBank, VNCB) such as Vietcombank, MB, Techcombank, VPBank, ACB, TPBank, MSB are expected to be granted a high credit limit. In contrast, banks with lending to real estate and investing in corporate bonds may have limited credit growth room at a moderate level.

In addition to the issue of credit room, the factor affecting bank profits in the second half of 2022 is interest rates. Currently, four state-owned commercial banks still maintain the same deposit interest rate, and the remaining 100% of private commercial joint stock banks have increased deposit rates, while lending rates have not been able to increase. This will reduce the net profit margin (NIM) of banks at risk, except for some banks that maintain a high CASA ratio.

In this regard, Mr. Pham Duc An, Chairman of Agribank's Board of Directors, said that credit surged sharply, causing many commercial banks to almost run out of credit room for the whole year. Moreover, the rapid increase in credit in the first half of the year, twice as high as that of capital mobilization, is a sign of potential risks for interest rates, which may increase lending rates, putting more pressure on inflation.

With the above problem, bad debt will also have a significant impact on bank profits in the second half of the year, especially when many warnings about potential and increasing bad debt danger have been issued.

But VCBS analyst said that banks have increased provisioning for restructuring debt, so even if Circular 14 of the SBV on debt restructuring affected by the Covid-19 pandemic-19 is not extended, the pressure on banks' provisioning is not too great. Therefore, banks will still maintain optimistic profit growth this year.