Stable outlook for Vietnam’s banking system on robust economic growth: Moody’s

Transactions at Techcombank (Photo: VNA)

According to Rebaca Tan, a Moody’s Assistant Vice President and Analyst, Vietnam’s GDP growth is forecast to moderate to 6.7 percent in 2019 and 6.5 percent in 2020 from 7.1 percent in 2018, but even at these projected rates the country will still remain the fastest-growing economy in the Southeast Asia.

Vietnam’s commercial banks have been cleaning up their balance sheets, supporting asset quality, and problem loan ratio of the bank system is expected to decline to 4.8 percent at the end of 2020 from 5.1 percent at the end of 2018, Tan said.

Capital ratios should remain broadly stable over the next 12-18 months, backed by growth in retained earnings, although a number of banks will need to raise capital to meet stricter Basel II capital requirements while sustaining asset growth.

Profitability will improve as the banks increase their lending to the higher yielding retail and small and medium enterprise (SME) segments, while credit costs will remain stable when banks continue to make provisions against legacy problem assets.

The Vietnamese Government will continue to provide support when needed, mainly in the form of liquidity assistance and regulatory forbearance, as it has done in the past.