Tuesday, October 15, 2024 2:03:17 PM - Markets open
VN-INDEX 1,283.78 -2.56/-0.20%
HNX-INDEX 229.27 -1.45/-0.63%
UPCOM-INDEX 92.17 -0.21/-0.23%
Small banks face more loan delinquencies, liquidity issues
vietnamnews - 9/4/2024 10:43:08 AM
 (0 ratings. You must sign in to rate.)
Several small Vietnamese banks are more vulnerable to liquidity risks due to their higher use of short-term market funds amid sluggish deposit growth.
 
 
View of a SGB’s transaction office. Small banks showed the most significant asset quality deterioration. Photo icom.com.vn
 
Asset risks and profitability of Vietnamese banks remained broadly stable, but small banks faced more loan delinquencies and liquidity issues in the first half of 2024, analysts said.
 
Under a H1 2024 report on the banking industry, released this week, analysts of credit rating agency Vietnam Investors Service (VIS Rating) said the Vietnamese banking industry’s problem loans ratio remained flat quarter-on-quarter (QoQ) at 2.2 per cent, with the highest asset quality deterioration observed in small banks.
 
Banks’ return on average assets (ROAA) rose slightly to 1.6 per cent in 6M2024 from 1.5 per cent in 2023, driven by stronger corporate credit growth and higher net interest margin (NIM). Several small banks are more vulnerable to liquidity risks due to their higher use of short-term market funds amid sluggish deposit growth.
 
“We expect banks’ asset quality and profits will remain stable in H2 2024 amid stronger operating conditions,” VIS Rating’s analysts noted in the report.
 
According to VIS Rating, small banks showed the most significant asset quality deterioration.
 
NVB, BAB, SGB and VBB exhibited higher-than-peer non-performing loan (NPL) formation rates, mainly from retail and SME borrowers. Among State-owned banks (SOBs), construction and real estate-related sectors drove higher NPLs for CTG and BID.
 
Several large banks reduced their problem loans by writing off their VAMC bonds (such as VPB) or large NPLs (such as MBB). TPB’s NPL formation rate remained low through tighter underwriting of new consumer finance loans.
 
VIS Rating’s analysts expect a low interest rate environment and policy measures aimed at supporting business activity in various sectors to help support debt serviceability and slow loan delinquencies.
 
Large private banks benefitted most from higher credit growth and wider NIM. TCB, HDB, VPB, and LPB recorded stronger loan growth than the industry average of 7.7 percent as of H1 2024, driven by corporate lending to real estate-related, trading, and manufacturing borrowers. NIMs for these banks rose by 30-60 basis points, leading to higher than industry-average ROAAs of 2.2 per cent on average. Fee income rose for some banks, including TCB, LPB, and TPB.
 
In contrast, profits for retail-focused banks (such as VIB and OCB) fell due to weak mortgage loan growth, lower investment income, and higher credit costs.
 
“We expect the sector ROAA will continue to benefit from strong loan demand from corporates, gradual pick-up in mortgage loan as new housing supply enters the market, as well as stable NIMs that are supported by low interest rates,” the report states.
 
Capital weakened for most banks in H1 2024. Sector tangible common equity (TCE) ratio fell by 0.3 per cent points from prior quarter as several large banks (such as VPB, MBB, ACB, TCB) paid cash dividends to their shareholders.
 
VIS Rating expects banks’ capital level will remain weak in H2 2024 due to limited capital raising plans. In addition, the sector loan loss coverage ratio (LLCR) declined to 82 per cent from 89 per cent in the first quarter of 2024, with SOBs recording the most significant drop due to higher NPLs. Conversely, LLCR for several private banks rose from improving asset quality and higher provisions.
 
Sector loan-to-deposit ratio (LDR) rose and small banks faced sluggish deposit growth and increased use of short-term market funds. The sector CASA deposits remained flat at 20 per cent of gross loans. MBB maintained the highest ratio through continued above-industry average growth in its retail deposits.
 
The sector LDR rose to 106 per cent in H1 2024 from 104 per cent in the first quarter of 2024. Among the small banks, ABB and BVB faced sluggish deposit growth as deposit competition intensified and increased the use of short-term interbank borrowings to support their loan growth. Meanwhile, liquid assets were 21 per cent of total sector assets, unchanged from the prior quarter.
 
“We note liquid assets for small banks contracted by six per cent in H1 2024, in contrast to five per cent growth for the sector. Hence, we remain concerned about the vulnerability of small banks to liquidity risks,” the analysts noted. — VNS
 
Read original article here
Newer News
14/10 Foreign exchange rate increases again in October
11/10 Retail credit remains under great pressure
11/10 Banks reduce profit expectations for 2024
10/10 Disbursement rate for public investment remains sluggish: MoF
09/10 State-owned banks struggle to increase capital
08/10 Central bank confident about credit growth this year
07/10 Promoting cashless payments for young
07/10 Transactions of gold on unofficial online market pose high risks
07/10 Banks not allowed to offer promotions to depositors
05/10 An open banking system is essential for a smart city
Older News
04/09 Ministry of Finance proposes new audit standards, targets large enterprise with stricter fines
04/09 Challenges of collecting e-commerce tax losses
31/08 Govt’ reduces registration fees to boost car sales
29/08 Banks with outstanding loans reaching 80 per cent of allocated credit growth quota allowed to expand credit room automatically
29/08 Banks issue bonds to raise long-term capital, adhere to regulations
29/08 Central bank takes looser monetary measures
29/08 Solutions deal with inflationary pressure from wage increases
28/08 Tax watchdog wants to develop a portal to manage individuals and households doing e-commerce business
28/08 First bank to stop selling gold via website, officially selling gold via app
28/08 Credit recovers after July decrease
 
Newsletter Signup
Top Stories
VCCI recommends mineral mining rights be granted through auction and bidding
Central bank works to raise interbank rates and ease forex market
Inflation a concern following salary increases
National Council for Sustainable Development established
Việt Nam, Cambodia look forward to $20 billion trade
Market Update
Last updated at 1:55:00 PM
VN-INDEX 1,283.78 -2.56/-0.20%
Real-time chart
Top 5 Actives
Top 5 Gainers
Top 5 Losers
My Favorite Quotes
Your most recently viewed tickers will automatically show up here if you type a ticker in the Get Quotes box on the top of the page.
Company Research
Type in the symbol above for thorough background information, key statistics and financial information.
Stock Sectors
We continuously improve our services, here are the latest updates...
Portfolio
Allow you to monitor a customised group of securities. You can set up multiple Portfolios to help you better manage your investments.
Trigger Alerts
Get up-to-date alerts delivered directly to your email address.
Stock Screener
Allow you to filter the market and find exactly what sort of company you are looking for.
Live Terminal
Get instant access to FREE REAL-TIME streaming quotes for hundreds of stocks from HOSE, HNX and UPCOM exchanges.