Compared to 2016, banks are looking at brighter prospects in 2017 as many indexes look like they are on a trend of improvement.
According to the National Financial Supervisory Commission (NFSC), the return on total assets (ROA) and the return on common equity (ROE) of credit institutions in 2016 was higher than in 2015. Specifically, ROA and ROE in 2016 reached 0.54 and 7.87 per cent, respectively—a major improvement compared to the 0.46 and 6.42 per cents in 2015.
Many banks’ business reports also reflect improving profitability ratios. For example, in 2016, VietinBank recorded a profit of $361.2 million, increasing 12 per cent on-year. Its ROA and ROE reached 10.9 and 1 per cent, respectively (in 2015, these indexes were 10.2 and 1 per cent).
Vietcombank’s profit before tax and after provisions in 2016 reached $359.5 million, increasing 23.4 per cent compared to 2015. Its ROA and ROE were also high, reaching 0.9 and 14.2 per cent.
MB’s pre-tax profit reached $162.5 million in 2016, increasing 18 per cent on-year. Its ROA and ROE were 1.2 and 13.55 per cent, respectively (in 2015, these indexes were 1.2 and 13.3 per cent).
TPBank’s profit before tax reached $30.9 million in 2016, increasing 12.93 per cent compared to 2015. Its ROE reached 12 per cent, higher than industry average.
“These numbers showed that the situation was not as bad as predicted in the beginning of 2016. It also showed that banks had assets and capital growth, and now have opportunities to improve profitability, signalling that they are now back on previous years’ track for growth. This tendency will continue and foretells a bright future for banks in 2017,” commented economic expert Dr Nguyen Tri Hieu.
Dealing with NPL: Collateral sales play major part
According to the State Bank of Vietnam (SBV), in the end of November 2016, the national nonperforming loan ratio (NPL ratio) was 2.46 per cent, lower than the 2.55 per cent at the end of 2015.
According to the NFSC’s overview of the 2016 financial market, the credit institution system has dealt with $4.16 billion of NPL. 52.6 per cent of this was resolved by debt recovery and collateral sales, 26.6 per cent by loss provision, and 21 per cent by selling to Vietnam Asset Management Company (VAMC).
According to ACB’s consolidated financial statement in the fourth quarter of 2016, its income from lending was $85.2 million, increasing 17.6 per cent since the fourth quarter of 2015. After provisioning $28.6 million for credit risk (10 times as much as in the same period of 2015), ACB’s pre-tax profit for the last quarter reached $18.48 million, increasing 89 per cent. For the whole financial year of 2016, ACB’s pre-tax profit was $73 million, 26.8 per cent higher than that in 2015. In particular, ACB’s total NPL at the end of 2016 was $62.1 million, 20 per cent lower than at the beginning of the year. The company’s NPL ratio also decreased from 1.31 per cent to 0.87 per cent.
SCB general manager Vo Tan Hoang Van told VIR that in the first six months of 2016, SCB dealt with $52.5 million of NPL (of the NPL sold to VAMC). In the last six months of 2016, SCB recovered $65.7 million of NPL, reducing the amount currently held by VAMC to $656.7 million.
VIB general manager Han Ngoc Vu said the bank has dealt with NPL resolutely via many measures, including supporting customers in business recovery and collateral sales. “For many years VIB has set aside great amounts of profit for risk provision,” Vu said.
Credit balance continues to increase
A senior leader of the SBV told VIR that credit growth of the whole system at the end of February 2017 was estimated at 2 per cent. According to a senior leader of Vietcombank, this number is no surprise as the bank’s credit growth was 4 per cent.
“Credit is increasing and plays a great part in the system’s business results, since profit mostly comes from lending,” said a general manager of a joint-stock commercial bank.
The results of the survey on credit institutions’ business trends published by the Monetary Forecasting and Statistics Department under the SBV showed that credit institutions are optimistic about their achievements in 2016 and confident about their progress in 2017.
Deposits and credit growth are expected to maintain development as the economy is predicted to be stable, with greater growth than last year. Stable currency and inflation kept within safe bounds also contributed to banks’ liquidity.
According to the Monetary Forecasting and Statistics Department under the SBV, deposit in the banking system is expected to grow 4.57 per cent on average in the first quarter of 2017 (VND: +5.13 per cent; foreign currency: +0.75 per cent) and 16.76 per cent in the whole year (VND: +18.12 per cent; foreign currency: +0.95 per cent).
The department expects that deposit growth will mostly come from VND accounts, while foreign currency deposits will only increase slightly (below 1 per cent, while in 2015 this growth was almost equal to VND deposits).
Credit institutions are expecting the credit of the whole system to grow 4.1 per cent in the first quarter of 2017 (VND: +4.29 per cent; foreign currency: +4.52 per cent) and 19.12 per cent in the whole year (VND: +20.19 per cent; foreign currency: +10.01 per cent).
Credit institutions admitted that the overall business situation kept improving through the four quarters of 2016, and is expected to continue improving this year as well. Specifically, 63 per cent of credit institutions expect the business environment to improve right in the first quarter of 2017, and 85 per cent expect improvements throughout the whole year. 20 per cent of these respondents expect “major improvement” and 65 per cent “little improvement”.
“Expectations for pre-tax profit growth of the whole system was approximately 8.27 per cent on average in 2016, less than the average expected 14.4 per cent recorded at the survey at the end of 2015 and credit institutions’ predictions in the previous quarters, but higher compared to the actual number in 2015,” a senior leader of the Monetary Forecasting and Statistics Department underscored.
In 2017, 89.5 per cent of credit institutions expect positive profit growth on-year. The average expected profit growth of the whole system was 13.4 per cent, higher than in 2016. According to expectations, the net interest income will increase by 12.74 per cent, the net income from fees and services by 16.57 per cent, and the net income from proprietary trading will also increase slightly (5.25 per cent).