Banks celebrate high profits, worry about lower profit margins

The source of profits

The financial report of Eximbank said that the consolidated profit before tax in the first quarter of 2022 reached more than VND 809 billion, nearly four times higher than the first quarter of 2021. As usual, net interest income contributed the most to the Bank’s revenue, with more than VND 1,244 billion, 1.5 times higher than the same period last year. Net profit from foreign exchange business reached 153.3 billion dong, up 60.9%; securities investment profit of 126 billion dong, more than 3 times higher than the same period last year. In addition to the growth in business segments, the reduction of provision expenses by more than half is also an important factor in helping Eximbank’s profit in the first quarter of this year accelerate.

VPBank announced its business results in the first quarter of 2022 with consolidated pre-tax profit of over VND 11,146 billion, nearly 3 times higher than the same period last year. This is the record profit in a quarter that the Bank has ever recorded. The growth rate of profit from core business of individual banks reached more than 56%. By the end of March 2022, VPBank’s credit growth reached 10.3%, double the industry average, with the main contribution from strategic segments. Regarding FE Credit members, the last two quarters of 2021 had a negative credit growth rate, but increased again with an increase of 1.6% in the first quarter of 2022.

Going deeper into the revenue structure, VPBank’s consolidated net interest income in the first quarter of 2022 reached VND 9,888 billion, an increase of 8.4% over the same period and an increase of 16% compared to the fourth quarter of 2021. mothers increased by nearly 30% and over 16%, respectively. Meanwhile, consolidated service fee income increased by 26.5% over the same period, this ratio recorded an increase of nearly 30% at the parent bank and 4.8% at FE Credit. Other income increased 9 times over the same period, including support fee from the exclusive cooperation agreement on insurance distribution between VPBank and AIA Vietnam Life Insurance Company. Income from debt settlement of the consolidated bank also achieved positive results, with VND 714 billion, up 21.3% compared to the previous quarter.

At SHB, the profit in the first quarter of 2022 reached more than VND 3,227 billion, an increase of nearly 94% compared to the same period in 2021 and equal to 28% of the whole year plan. In which, net interest income reached VND 4,223 billion, up 89.7% over the same period. Regarding non-interest income, net profit from service activities increased by 24.3%, reaching VND 157 billion; net profit from securities investment activities reached 66 billion dong, up 27.1%; Other business activities profit 209 billion dong, 2.2 times higher than the same period last year…

The picture of the first quarter of 2022 business results of banking stocks has revealed many positive points, but there are also some notable problems.

In the first quarter of this year, ACB recorded a pre-tax profit of VND 4,114 billion, up 32.5% over the same period last year and equaling more than 27% of the whole year plan. Two drivers for ACB’s profit growth were net operating profit, which increased by more than 400 billion dong (up 10.8%) and provision reversal of 2.8 billion dong, while the same period had to set aside nearly 606 billion dong. copper.

According to MB’s financial report, profit before tax in the first quarter of 2022 reached VND 5,909 billion, up 29% over the same period in 2021. In which, net interest income reached VND 8,385 billion, up 41%, mainly due to Interest income on loans and interest income from investment in debt securities increased sharply. Profit from service activities increased by 4.8% to 1,117 billion dong. Notably, profit from foreign exchange business increased by 98%, to 467 billion dong; profit from securities trading increased by 63%, reaching 1,124 billion dong.

For VIB, this bank recorded a pre-tax profit of nearly VND 2,300 billion in the first quarter of 2022, up 26% over the same period. The bank explained, the growing profit comes from focusing on high-quality retail credit portfolio, minimizing concentration risks with nearly 90% of the portfolio being retail loans and 95% having collateral. .

Don’t think red is ripe

According to the State Bank of Vietnam, credit growth reached 5% in the first quarter of 2022 and 6.8% as of April 25. Compared to the 3% growth in the first quarter of 2021, credit has really recovered strongly, reflecting the need to expand business activities of most businesses.

In an exchange with Securities Investment, Ms. Tran Thi Khanh Hien, Head of Analysis Division, VNDIRECT Securities Company shared: “According to our observations, most of the listed banks have recorded an increase in growth. credit growth higher than the same period last year. Lending activities at a few banks have exceeded 10%, such as MB, HDBank, and increased many times over the same period last year, such as VietinBank.

Although credit has grown rapidly, capital mobilization does not seem to have caught up. This is explained by the low deposit interest rate in 2021 and the attractiveness of other investment channels such as corporate bonds, securities, etc., which have attracted the majority of residential deposits. This will put pressure on some banks that do not have a capital advantage or have a loan-to-deposit ratio (LDR) that is close to the prescribed threshold.

Besides, net profit margin (NIM) continued its downward trend in the first quarter of 2022. This was expected because the decline in NIM has appeared since the fourth quarter of last year when banks drastically cut lending rates to support customers affected during the difficult period due to the Covid-19 epidemic. , while deposit rates tend to inched up.

Non-interest income growth remained stable, with most banks recording positive non-interest income growth, largely thanks to the contribution of bancassurance activities, which were limited in the first half of 2021 due to social distancing.

“From the above favorable factors, most of the listed commercial banks recorded positive growth in pre-tax profit in the first quarter of 2022. However, the decrease in asset quality compared to the end of 2021 is a notable issue. According to our estimation, the average bad debt of listed banks increased slightly compared to the end of 2021; as well as the bad debt coverage ratio (LLR) tends to decrease slightly,” said Ms. Hien.

According to Ms. Hien, despite the emergence of new factors such as geopolitical tensions or the sharp increase in oil and input materials prices, hindering the recovery of some industries, in general, the economy is kicking off the momentum. strong growth machine. Therefore, the debt repayment capacity of enterprises will recover, especially in the second half of 2022.

According to Ms. Hien, unlike the period 2016 – 2017, the resilience and asset quality of Vietnamese banks have been significantly improved, reflected in the NPL coverage ratio reaching the highest level ever. now. Many banks have drastically set up provisions to bring the bad debt coverage ratio to over 200%, even more than 400%. Besides, the positive developments of the real estate market in 2022 will help reduce the risk of increasing the bad debt ratio. However, if the real estate market grows too “hot”, forming a “real estate bubble”, the risk of bad debt in the period of 2023 – 2024 will appear.

However, Ms. Hien still gave an optimistic forecast: “If there are no more unpredictable factors such as epidemics, escalating geopolitical tensions… affecting the overall picture of the economy. , the situation of bad debt this year will not be too stressful. Banking is still a promising industry group in the coming time with banks having characteristics such as boosting credit, or increasing the proportion of non-interest income (through bancassurance, investment banking services, business transactions, etc.). foreign exchange…) will be the dominant banks.

“Besides, in the context of less fierce deposit competition and abundant liquidity, I prefer banks that are able to promote personal loans to get better asset yields. At the same time, due to concerns about the possibility of bad debts increasing in the next few quarters, I think banks with solid asset quality and abundant reserves will be a reasonable choice”, Ms. Hien emphasized.

According to the Pope