Will bank profits continue to prosper in 2022?

	Banks raise provisions in anticipation of bad debt
	Three big banks have great profits, but bad debts increase fast
	Bad debts at some banks have skyrocketed

All banks have great prospects for profits in both 2021 and 2022. Photo: Internet

A report on the banking sector by Maybank Kim Eng Securities Limited (MBKE) showed that, in the first nine months of 2021, net interest income of listed banks grew well. Banks' continued efforts to improve their demand deposit structure (CASA) and access to cheaper wholesale funding are factors contributing to lower capital costs.

Besides net profit, according to the MBKE, income from fees (especially insurance cross-selling fees) is also one of the growth drivers for banks. In addition, banks also control operating costs very well, especially banks with fast digital transformation progress.

While income growth is good, bad debts of banks are not bad as previously expected. MBKE believes that this may be because the level of bad debt of banks before the pandemic was relatively low, and even very low in some banks.

According to the analyst of Mirae Asset Securities Company, the current bad debt of Vietnamese banks does not cause systemic risks, causing no shocks to banks in terms of provisioning. With the recovery of the economy, the debt repayment capacity of enterprises will increase again. Therefore, bank profits will have many prospects to increase in the fourth quarter of 2021 and 2022.

According to the MBKE's forecast, 17 listed banks will achieve 10% profit growth in the fourth quarter of 2021, equivalent to VND44,000 billion in pre-tax profit (equal to the average of the first three quarters of the year) thanks to stronger credit growth and fee income. For the whole of 2021, banks' profit growth will be at 33% compared to the previous year.

At a recent meeting with investors, Hoang Linh, VIB's deputy financial director, predicted that VIB's net interest income and NIM would improve in the fourth quarter of 2021 when the majority of customers with debt restructuring plan to repay earlier than the support plan. VPBank leaders also expect that retail and consumer loans will accelerate again in the fourth quarter of 2021.

In 2022, the service and investment segments are expected to continue to bring profits to banks, especially as banks continue to promote the signing of insurance cross-selling contracts. For example, Tran Minh Binh, Chairman of VietinBank's Board of Directors, said that the bank is carrying out procedures to finalize an insurance contract with Manulife, which is expected to record income in the first quarter of 2022. Similarly, VPBank is also continuing to discuss with AIA insurance about the exclusivity agreement.

At the same time, with abundant capital from the sale of financial companies, banks will also have more profits. MNguyen Hoang Linh, General Director of MSB, said that the bank is in contact with 2-3 investors and is in the process of signing a transfer contract to sell all 100% capital of FCCOM Finance Company in November 2021. The estimated value of the deal is not less than US$100 million and MSB can earn VND1,800-2,000 billion in profit in 2022.