Back to Previous Page
Vietnam Banking Sector – 2023 Review and Outlook
* There are 27 banks listed in the market, of which we examine 10 key institutions, collectively commanding assets worth $462 billion, representing a substantial 55% of the sector’s total assets.
- Sustained low interest rates to support 2024 credit growth: Fueled by aggressive interest rate cuts, Vietnam’s credit market witnessed a significant surge in demand in the latter half of 2023, propelling overall credit growth to 13.5%. With local inflation remaining subdued and global central banks pivoting towards accommodative policies, we anticipate interest rates in Vietnam to stay low, fostering credit growth of 14% in 2024.
- Net interest margin (NIM) to expand by 20bps: NIM contracted 40bps in 2023 due to higher funding costs while banks reduced lending rate to stimulate credit demand. However, lower deposit rates and CASA recovery are poised to drive NIM expansion.
- Normalized non-interest income: The struggle of bancassurance after the overselling issue negatively impacted fee income in 2023. Fortunately, low government bond yield allowed banks to record significant gain from investment and offset the weak performance of bancassurance. Looking ahead, we expect bancassurance to recover slowly. Meanwhile, investment services fees are expected to be strong due to robust inflows into the equity market and the return of corporate bond issuance. Gains from investment are likely to be lower than last year given government bond yield is currently very low.
- Continued high provision to keep non-performing loans (NPL) ratio flat: In the final quarter of 2023, Vietnamese banks witnessed an improvement in asset quality. NPL and Group 2 loans fell by 10.4% and 12.4% compared to Q3. Recall that major drivers of NPL were SME and retail loans, both of which are expected to perform better in 2024 thanks to accelerating business activities and continued low interest rates. However, provisioning pressure in the housing sector to remain, particularly for developers and projects facing delays in legal approvals that hinder launch or delivery.
- 2023 EPS grew by 2.1%, but to accelerate in 2024F: In 2023, the banking sector faced several headwinds, including narrower NIM, subdued fee income, and higher NPL. These factors collectively dampened earnings growth. However, we expect a reversal of these trends in 2024, leading to a positive impact on banks’ bottom lines.
- New regulation is in place and the cash dividend policy is back: The National Assembly recently approved the new credit institutions law, which aims to enhance transparency in ownership and lending activities of banks. At the same time, more banks are distributing profit via cash dividend after postponing for a long period.
Company ratings and target prices are accessible for clients only.
If you are interested in getting full access to our paid Primary Research Materials feel free to get in touch with us at your convenience.
Our team is actively covering 50 companies in the listed Vietnamese equity space for our clients.
Featured image credit: vietnamnet.vn
