Vietnam banking sector to suffer in 2020 before rebounding in 2021

Fitch Solutions expected credit growth to weaken to 7% in 2020 from 13.7% in 2019, but the growth is predicted to pick up to 12% one year later.

Vietnam’s banking sector earnings are predicted to weaken in 2020, due to weaker credit growth, rising loss provisioning alongside a worsening of asset quality in a weak economic environment, as well as debt restructuring schemes, according to Fitch Solutions, a subsidiary of Fitch Group.

However, an acceleration in credit growth and an improvement in asset quality in 2021 should support a recovery in earnings in the banking sector, stated Fitch Solutions in its latest report.

 Source: Bloomberg, Fitch Solutions.

In 2020, Fitch Solutions expected credit growth to weaken to 7% in 2020 from 13.7% in 2019. Credit growth as of September 22 was only 5.1% above end-2019 levels. According to Fitch Solutions, this is due to a combination of supply and demand factors over the coming months.

On the demand side, continued uncertainty around the economic outlook will continue to spur businesses to delay capital expenditure, and this will discourage borrowing. On the supply side, tighter lending standards by financial institutions to guard against a build-up of bad loans will also weigh on issuance.

Meanwhile, Fitch Solutions expected banks to increase their loan loss provisioning in anticipation of a worsening of asset quality due to weak economic growth in 2020.

It forecast real GDP growth to weaken to 2.6% in 2020, from 7.0% in 2019, while there is the risk of the weak economic environment seeing the sector-wide non-performing loan ratio rise higher in 2020, from 1.9% at the end of 2019.

 

Between January and September 2020, more than 38,600 enterprises have temporarily suspended operations, up 81.8% year-on-year. Of this number, retail trade saw the largest absolute increase to 14,400, from 8,211, up 75.3% year-on-year, while real estate businesses saw the largest proportionate increase among all sectors at 161.4% to 1,103 enterprises over the period.

The number of business bankruptcies remained fairly flat on aggregate across the sectors over the first nine months of 2020. Although many sectors saw a fall in bankruptcies in 2020 versus 2019, the real estate sector bucked the trend and bore the brunt of the increase in business bankruptcies, with real estate bankruptcies rising to 696, up 50.3% year-on-year.

Debt restructuring schemes to reschedule debt repayments for companies unable to fulfil their obligations due to the Covid-19 outbreak, as well as possible exemption and reduction of interest and fees for delinquencies due to the pandemic, will also have a negative impact on bank earnings, Fitch Solutions suggested.

Nevertheless, as Fitch Solutions expected Vietnam’s GDP growth to reaccelerate to 8.2% in 2021, it predicted credit growth to pick up to 12%. An improvement in business revenues and debt repayment will also be positive for asset quality and reduce the need for loss provisioning, which will support earnings. Hanoitimes

Ngoc Thuy

Billions of banking stocks to flood market under dividend plans

Billions of banking stocks to flood market under dividend plans

Billions of banking stocks are about to flood the market with banks planning to pay stock dividends and issue new shares to raise their charter capital.

 
 

Other News

.
17th CAEXPO to benefit China-Vietnam cooperation
17th CAEXPO to benefit China-Vietnam cooperation
BUSINESSicon  23/11/2020 

China and Vietnam are friendly neighbors connected by mountains and rivers, and have achieved fruitful results in the sustained economic and trade cooperation. 

'Ghost' restaurants flourish in Ho Chi Minh City
'Ghost' restaurants flourish in Ho Chi Minh City
BUSINESSicon  23/11/2020 

Without tables, chairs or waiters, "ghost" restaurants are flourishing in Vietnam, serving only online customers.

Thousands of Mercedes-Benz recalled in Vietnam over defective airbags
Thousands of Mercedes-Benz recalled in Vietnam over defective airbags
BUSINESSicon  22/11/2020 

Some 3,200 Mercedes-Benz cars in Vietnam have been found to have problems with Takata airbags, according to the Vietnam Register.

Binh Dinh-based Phu Cat airport proposed to become international one
Binh Dinh-based Phu Cat airport proposed to become international one
BUSINESSicon  22/11/2020 

The Binh Dinh government has written to the Ministry of Transport and the Civil Aviation Authority of Vietnam proposing turning Phu Cat Airport into Phu Cat International Airport.

Vietnam, Oman to foster bilateral trade
Vietnam, Oman to foster bilateral trade
BUSINESSicon  22/11/2020 

The two-way trade turnover increased sharply from US$117 million in 2017 to US$200 million in 2019.

Ministry working to promote growth of support industries
Ministry working to promote growth of support industries
BUSINESSicon  22/11/2020 

The Ministry of Industry and Trade (MoIT) has introduced a range of measures to boost the growth of support industries in a bid to promote the engagement of local companies in production chains.

What does the 'rescue' of Vietnam Airlines reveal?
What does the 'rescue' of Vietnam Airlines reveal?
FEATUREicon  22/11/2020 

The national airline of Vietnam finally saw "the light at the end of the tunnel" when the National Assembly agreed with the Government's proposal for solutions to help Vietnam Airlines overcome difficulties caused by the Covid-19 pandemic.

Electronics industrial clusters to be piloted
Electronics industrial clusters to be piloted
BUSINESSicon  22/11/2020 

The Ministry of Planning and Investment has instructed localities to review and report on the development of industrial zones with investment projects in the electronics industry with a scale starting from US$20 million.

Real estate inventories see decline: ministry
Real estate inventories see decline: ministry
BUSINESSicon  22/11/2020 

Inventories in the real estate market have been on the decrease thanks to increasing liquidity, according to the Ministry of Construction (MoC).

Up to 16,000 foreigners buy housing in Vietnam in last five years
Up to 16,000 foreigners buy housing in Vietnam in last five years
BUSINESSicon  21/11/2020 

Between 14,000 and 16,000 foreigners have bought housing in Vietnam since July 2015, mostly from China, the Republic of Korea, Japan, Taiwan (China), and Singapore, the HCMC Real Estate Association (HoREA) estimates.

Global media positive about Vietnam’s growth despite COVID-19
Global media positive about Vietnam’s growth despite COVID-19
BUSINESSicon  21/11/2020 

A number of regional and global news agencies have quoted data from international research institutes and organisations as saying that Vietnam’s economy is on track to grow despite the impact of COVID-19.

Challenges and opportunities from Covid-19 for Vietnam's M&A market
Challenges and opportunities from Covid-19 for Vietnam's M&A market
BUSINESSicon  21/11/2020 

Low interest rates could open up new opportunities for investors to take advantage of the cheap capital to buy shares and acquire new assets via M&A deals.

Vietnam proves potential to profit from shifts in global supply chain
Vietnam proves potential to profit from shifts in global supply chain
BUSINESSicon  21/11/2020 

Years of economic growth and success in fighting Covid-19 paved the way for Vietnam to receive shifting FDI inflows, but limited participation in manufacturing industries might hinder its progress.

Vietnamese consumers increasingly embrace sustainability
Vietnamese consumers increasingly embrace sustainability
BUSINESSicon  21/11/2020 

Sustainability has been a growing topic of interest to Vietnamese consumers in recent years though awareness levels remain well below the global average.

VN corporate bond market cools for 2nd month
VN corporate bond market cools for 2nd month
BUSINESSicon  20/11/2020 

The value of corporate bonds issued in October was VND9.5 trillion (US$409 million), down 12.8 per cent from September, according to the Hanoi Stock Exchange (HNX).

Under FTAs, car imports will be subject to lower tariffs
Under FTAs, car imports will be subject to lower tariffs
FEATUREicon  21/11/2020 

The two important FTAs – CPTPP and EVFTA – all have strong commitments on tariff cuts, with the tariffs expected to be completely removed in 7-13 years.

VIETNAM BUSINESS NEWS HEADLINES NOVEMBER 22
VIETNAM BUSINESS NEWS HEADLINES NOVEMBER 22
BUSINESSicon  22/11/2020 

Automobile sales surge in October

Vietnam’s digital economy to reach $14 billion this year
Vietnam’s digital economy to reach $14 billion this year
BUSINESSicon  20/11/2020 

Vietnam’s digital economy is expected to reach 14 billion USD in 2020, a year-on-year increase of 16 percent, and will likely reach 52 billion USD in 2025, re-accelerating to nearly 29 percent in compound annual growth rate.

Japfa Comfeed Vietnam inaugurates 6th animal feed mill in Binh Dinh
Japfa Comfeed Vietnam inaugurates 6th animal feed mill in Binh Dinh
BUSINESSicon  20/11/2020 

Japfa Comfeed Vietnam Co., Ltd. on November 18 inaugurated its 16th feed mill in the Nhon Hoa Industrial Park in Binh Dinh Province. This modern factory will supply high-quality animal feed for potential markets in Vietnam’s central region.

Vietnamese chocolate products have chance to enter global market
Vietnamese chocolate products have chance to enter global market
BUSINESSicon  20/11/2020 

There is an opportunity for Vietnamese chocolate to become a niche player in the world market with a brand of unique flavoured cocoa, according to the Belgian ambassador to Vietnam.

 
 
 
Leave your comment on an article

OR QUICK LOGIN