September 04 2020

FiinResearch

Vietnam Banking Report 2020


Total Page:

120 Pages

Format:

PDF

Topic:

Financial Service

Delivery:

within 1 day(s)

58.000.000 VND

USD 2,500.0

Following the Government’s implementation of effective COVID-19 containment measures, in the first half of 2020, Vietnam economy witnessed GDP growth falling to 1.81%, the lowest first-half growth for the last 10 years. The pandemic has disrupted global trade and supply chains leading to deterioration in corporate earnings and individual income, which eventually weakens credit demand and asset quality of the banking sector in Vietnam.

In this Banking Report 2020, we provide in-depth analysis of the impact of COVID-19 on every aspect of the banking sector and individual banks, including credit growth, asset quality, earning quality, liquidity, profitability, and operation efficiency. Development trends and regulations in response to the pandemic are also covered.

Credit growth inched up by only 3.45% in the first 7 months

Credit growth registered a modest 3.45% YTD growth in the first 7 months, significantly lower than the same period last year (7.48%). Despite a series of measured adopted by SBV to encourage credit growth, the demand for new loans fell sharply, since businesses had to scale down production and postpone investment plans. Meanwhile, banks also take extra caution in loan appraisals, considering that the ability to pay back debt of individuals and enterprises are both worsening.  

Asset quality of banks appears to be distorted in 1H2020

Reported NPL ratio of credit institutions hovered at 1.63%, while total NPL ratio including bad debts held at VAMC and potential bad debts declined from 4.96% to 4.43%. However, the figure did not fully reflect the asset quality picture of banks due to the influence of SBV’s Circular 01 which allowed credit institutions to postpone categorizing overdue debts incurred before 23 Jan to NPLs. Concurrently, corporate earnings considerably worsened in the 1H2020, threatening their ability to pay back debt and eventually bank asset quality.

Banks’ earning quality diminished amidst the increasing prevalence of COVID-19

In 1H2020 average NIM, which was heavily impacted by reduction in interest rates and decline in demand deposit, recorded a low level of 2.9%. Net fee and commission income also declined substantially.

Liquidity remained abundant due to slow credit growth

The liquidity of the banking system remained abundant, reflected in the overnight interbank rates and government bond yield that have remained low since the beginning of the year. In 1H2020, despite modest expansion, total customer deposit and money supply still grew beyond credit growth as bank saving is still considered a save choice amidst the complicated epidemic and economic downturn, which helped maintain the abundant liquidity for the banking sector.

Various policy measures have been implemented to counter the effects of the pandemic

Notably, under Directive 11, the Government grants the fiscal package of VND30trn for tax exemption/reduction and the VND250trn credit package that credit institutions may assist customers affected by the pandemic. Also, SBV’s Circular 01 allows credit institutions to reschedule the payment term for both principal loans/financial leases and overdue interest overdue from 23rd January 2020 until the Covid-19 ends for 3 months.

COVID-19 has offered an opportunity for Vietnam banking sector to promote digitalization

Digital transformation has bloomed among Vietnamese banks recently with the surge of digital banking transaction volume and value. The emergence of COVID-19 along with changes in consumer behavior and support from the Government bolstered this transformation.

PART

CONTENT

PAGE

 

What's new in this report

6

1

Vietnam’s economy in the light of the COVID-19 pandemic

8

2

Review of banking sector

15

2.1

Credit growth

16

2.2

Deposit growth

23

2.3

Asset quality

27

2.4

Earning quality

34

2.5

Liquidity

40

2.6

Capital adequacy

45

2.7

Operation efficiency & profitability

47

3

Vietnam non-bank updates

50

3.1

Consumer finance

51

3.2

Capital market

53

3.2.1

Equity market

54

3.2.2

Fixed market

57

4

Key development trends in financial sectors

69

4.1

Loopholes in Corporate bond market and local regulators’ reaction

70

4.2

Digital Transformation in financial sectors

76

4.3

M&A and sector consolidation

83

5

Major Policy and Regulatory Framework Updates

86

5.1

Policy responses to the COVID-19 pandemic

87

5.2

Updated regulations on the banking sector

92

5.3

Updated regulations on non-bank credit institutions

95

5.4

Updated regulations on capital market

98

5.5

Updated regulations on financial inclusion

101

6

Appendices

105

6.1

Profiles of SOCBs

106

6.2

Profiles of selected JSCBs

110

...

Tags: Banking report 2020, slow credit growth, CASA, abundant, liquidity, mismatch, asset quality, NPL earning quality, NIM, net interest income, profitability, efficiency, CIR, ROA, ROE, COVID-19, SOCBs, JSCBs, pandemic, corporate earning, digital payment, aff

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