Bank shares has been leading the market over many years. FiinPro has reported a stable 3-digit growth rate of this share in the last five years with a growth rate of 154.1 percent, much higher than the 96.5 percent growth rate of the VN Index.

Banks’ profit growth may slow down in 2019

CEO of HSBC Vietnam Pham Hong Hai commented that the banks’ EPS (earnings per share) will reach its peak in 2018 as all banks have finished provisioning against risks for the loans in 2012-2014.

However, Hai thinks banks would see the profit growth slow down in 2019. 

It is highly possible that the credit growth rate ‘quota’ for 2019 would be decreasing, while the State bank doesn’t intend to maintain the average high credit growth.

Moreover, once applying Basel II, some commercial banks would have to restructure their business fields. They won’t be able to rely on credit growth and will have to increase the proportion of revenue from banking services. 

Vietnam has been witnessing high credit growth rate since 2014 (14.16 percent in 2014, 17.29 percent in 2015, 18.71 percent in 2016 and 18.17 percent in 2017). 

A high proportion of loans has been disbursed to fund real estate projects, which are considered risky loans because of the real estate price fluctuations. There is still no official report about the possible impacts the lending to real estate sector can have on banks’ bad debt situation.

Impetus for economic growth

The participants attending a workshop on the real estate market recently agreed that the continuous credit and banking services growth will still be the major factor behind banks’ growth.

In principle, the quality of profit would depend on the list of products banks have advantages. VIB Bank, for example, has advantages in lending to buy cars, while other banks have diversified targets, including customers who want loans to buy houses.

StoxPlus believes that the interest rate risks will have a big impact on the profits banks expect from bonds in 2018. The bond yield has increased by 100 points since early 2018.

In the last few years, the revenue from investments, mostly in government bonds, has been making great contribution to the banks’ total revenue. However, as the interest rates have increased again and the bond yield has increased by one percent to 3.89 percent last September, many banks might see their revenue decreasing.

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