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| The average profit growth in the first quarter of 2022 of banks is relatively low. Photo: Internet |
Average growth is low
Although March has not yet ended, some banks have made their profit forecasts for the first quarter of 2022.
At VIB’s annual general meeting of shareholders, Mr. Ho Van Long, VIB’s Deputy General Director, said that the bank’s profit was estimated at VND2,200 billion in the first quarter, up 24-25% over the same period last year and equivalent to 21% of the year plan, with credit growth of over 5%.
At the Investor Meeting in mid-March, Mr. Luu Trung Thai, Vice Chairman of the Board of Directors and General Director of MB, also revealed that MB’s consolidated profit was about VND5,500 billion in the first quarter.
However, in general, the profit prospect of the whole banking system is not as expected, mainly because the two big banks pulled back.
According to information released by SSI Securities Company in the Banking Industry Outlook Update Report launched recently, the average profit growth of banks is relatively low in the first quarter of 2022, only increasing by 9-11% compared to the same period last year.
The main reason is that the profits of the two big banks, VietinBank (excluding the cross-selling of insurance – bancassurance) and Vietcombank decreased from a high level in the same period in 2021.
The remaining banks can achieve an average growth in pre-tax profit of about 25-27% over the same period last year.
This number is higher than SSI’s previous expectation because VPBank has extended the exclusive insurance distribution cooperation agreement with AIA along with an additional prepaid fees, helping the bank to achieve good profit growth in the first quarter.
According to SSI, the highest profit growth is expected at SHB, Sacombank, MSB, VPBank and LienVietPostBank. SSI identified three main factors that helped banks achieve stable profit growth during the period.
Firstly, credit grew strongly over the same period last year. Credit growth of banks in the research fluctuates from 2% to 10% compared to the beginning of the year. Some banks with higher credit growth rates are Vietinbank, MB, HDBank and TPBank in the first quarter.
Secondly, the difference in deposit and lending interest rates (NIM) is stable compared to the previous quarter. While HDBank, VPBank and Techcombank increased deposit rates by 10-20 percentage points, other banks remained unchanged. Some banks still have room to optimize LDR (credit balance on mobilized capital) and maintain stable NIM during the period.
Thirdly, bad debts and restructuring loans are controlled. Because banks have actively dealt with bad debts and consolidated the provision for credit risks in the fourth quarter of 2021, bad debts and restructured loans did not have too many fluctuations in the first quarter of this year.
Expecting new elements
SSI experts expect that the growth rate in the first quarter will continue to be maintained for the remaining three quarters thanks to the credit growth of banks in 2022 remaining at a relatively high level.
| “This year’s pre-tax profit growth may reach about 24-25% over the same period. Dividends in shares are expected to fluctuate from 15% to 35%. The biggest risk for the banking industry right now is that deposit interest rates will rise faster than expected if inflation rises ominously”, said SSI. |
The factors that support the stocks are business results of the first quarter, information about the general meeting of shareholders of banks, the possibility of a better-than-expected economic recovery, and extraordinary income from bancassurance.
It can be said that the above statements were reasonable when credit growth was forecast at a high level thanks to the recovery momentum of the economy and the program to support economic recovery. Besides, the bank’s service activities are expected to be new factors, continue to grow well and contribute to the bank’s revenue in the future.
For example, the wave of banks signing deals with securities companies and fund management companies to increase cross-selling products has been active again.
Earlier this year, VPBank attracted attention when it returned to the securities industry by acquiring more than 97% of shares in ASC Securities Joint Stock Company and changing its name to VPBank Securities Company (VPBank Securities).
In February 2022, SSI also announced that it had successfully signed a loan contract with a limit of VND10,000 billion, equivalent to more than US$440 million with VietinBank’s Hanoi branch. Recently, SCB signed a cooperation agreement with Tan Viet Fund Management Joint Stock Company (TVFM) in the field of providing product services, on the principle of prioritizing the use of products and services of SCB, ensuring effective competition in terms of quality and cost.