Vietnam banking sector – 2018 review and 2019 outlook

Vietnam banking sector note – 2018 review and 2019 outlook.


2018 review:

  • 2018 was a bright year for the banking sector when profitability of most banks expanded strongly thanks to: (1) higher exposure to retail lending which have higher yield than corporate lending; (2) emergence of non-interest income; and (3) normalized provision expense.
  • For some private banks and VCB, it was even more successful when they raised new capital and thus took one step closer to Basel 2, and in fact, there are certain names already got approval for Basel 2 compliance in late 2018 which bring positive signal for the banking sector.
  • However, there are also some outstanding problems related to asset quality transparency and capital shortage at some banks that really need to be improved as soon as possible.


2019 outlook:

  • In 2019, the State Bank of Vietnam (SBV) released the credit growth target for the whole economy only about 14%, lower than 16% in 2018.
  • Not to mention, there will be less one-off income from bancassurance or divestment so it is very likely that the sector will witness slowing down in profit growth.
  • However, we are still positive on retail banking given substantial available room to grow as well as the development of other income streams.
  • In this report, we consider for 11 banks which have total assets of $ 235bn, represents for 75% total assets of the whole sector, so we believe this might be a good proxy to sketch through the picture of Vietnam banking sector.

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