Banking Sector Outlook in Vietnam: Opportunities and Challenges
June 28 2022
On June 23rd 2022, FiinGroup and scoutAsia have successfully organized the Live webinar: Banking Sector Outlook in Vietnam: Opportunities and Challenges, with the participation of over 400 representatives from financial institutions, consulting firms, investment funds and large corporates in Vietnam, Singapore, Korea, Japan, EU and the US.
This event provided the audience with comprehensive information and in-depth analysis of the emerging banking sector in Vietnam.
Joining the event, FiinGroup and scoutAsia’s representatives together with Dr. Can Van Luc - Chief Economist of BIDV & President of BIDV Training and Research Institute, discussed the performance and the outlook of the banking sector, the central bank (i.e State Bank of Vietnam) reactions to support businesses to recovery post COVID, support commercial banks to handle bad debts and to contain inflation risks, role of rating services for the development of corporate bond market and lending business in Vietnam in the time to come.
In the short run, the banking sector might face some challenges in terms of bad debts and modest capital adequacy. In the long run, the prospect for the sector is promising thanks to recovery of economy post COVID, strong consumption demand, low consumer lending penetration rate and increasing credit demands.
Please kindly have a look at the highlights on the banking sector outlook from the webinar:
Credit growth is forecasted to achieve 13% - 14% in 2022 thanks to strong recovery of economic activities as well as increasing capital demand.
On-balance sheet NPL might increase to around 2% - 3% by the end of this year mainly due to full reclassification of COVID-restructured loans. However, NPL would be well contained and addressed by local banks thanks to improved credit quality of borrowers after the reopening of economy and local banks’ strong loan loss coverage to absorb the future loss.
NIM would witness a decline due to hikes in deposit rates as the liquidity is not abundant in the context of increasing credit demand and SBV direction to contain inflation risks. Fee and commission (especially those from bancassurance) continue to be a stable and non-risk income for banks in coming years.
Digital transformation continues to be the backbone of most local banks’ long-term strategies to increase their target customer base, improve the customer experience, and optimize their end-to-end business operations.
Consolidation in the banking and consumer finance sectors is expected to keep occurring in 2022 – 2025 thanks to mandatory transfer/restructuring of “zero-dollar banks” supported by SBV and large banks; acquisitions of local finance companies by leading local and foreign strategic buyers. Private placement opportunities would also be available from local credit institutions to raise equity and debt capital for strengthening their capital buffers as required by current local regulations as well as to support their long-term business growth.
Rating service would become an essential one in the time to come to support corporate bond market development, lending business and for credit institutions themselves when they join capital market to raise debt capital in forms of bonds, loans or other debt instruments.
Last but not least, Mr. Dong Le – Representative of FiinGroup also discussed some challenges faced by foreign investors in sourcing reliable business information and market insights on financial sector and how FiinGroup support the clients to handle their assignments as well as our track records in the sector.
Kindly refer to the detailed presentation handout HERE.
Revisit the full webinar HERE.
Check out the latest Vietnam Banking Report 2022 HERE.