Analysts from the Viet Dragon Securities Company (VDSC) say despite the dip compared to 2018, results are still positive.
In a banking industry report released recently, analysts attributed the slowdown to reduction in income from interest of loans and net profit margin (NIM) ratio.
According to the report, the NIM ratio will decline due to the pressure for banks to raise medium and long-term capital to meet a State Bank of Vietnam’s strict regulations.
Those regulations have seen a reduction in the ratio of short-term capital used for medium- and long-term loans from 45 percent to 40 percent from early 2019 and raising the capital adequacy ratio to prepare for applying international banking standards Basel II from early 2020.
The NIM reduction was also forecast as the proportion of retail outstanding loans at banks is high and competition in retail lending increasing.
Another factor is that banks’ provision expenses for risky loans continue to be high, especially in banks, such as BIDV, Vietinbank, VPBank, TPBank and HDBank, whose non-performing loans are still kept at the Vietnam Assets Management Company (VAMC).
According to VDSC, banks’ profitability will be also affected adversely as banks’ irregular non-interest income, including from the signing of life insurance contracts and divestments, will be no longer abundant as previously.
The VDSC analysts also forecast local banks will face risks in 2019.
Consumer finance is a business segment that shows saturation in demand that makes loan growth difficult. It will increase the competition and difficulties in the business segment if there are new entrants to take part in the market and the competent authorities tighten management regulations on the segment.
As the proportion of retail outstanding loans continues to increase, in which the housing loans are still dominant, banks would face more risks if the real estate industry falls into a downward cycle, according to the report.