Customers at Vietcombank's headquarters at 11 Lang Ha, Hanoi. (Photo courtesy of Vietcombank) However,the conflict almost certainly will drive oil prices up, disrupt the globalsupply chain and create inflationary pressure. As a result, firms willlikely be more hesitant to make investments, consumers cut back on spending anddemand for credit drops.
During2021, the banking sector reported 146 trillion VND in profit, or 6.39 billion USD,a 33 percent increase year-on-year, mainly from interest and banking fees. Theprofit trend has been said to likely continue in the near future but thesector's profitability is not without risks.
Alarge part of future success depends on the banks' ability to recover andrestructure debts. Assets tied up in bad debts will likely rise asgovernment measures to support businesses are set to expire at theend of June, said Yuanta Securities, a Taiwanese investment bank.
"Inthe event of increased bad debts, banks, especially those with already-low loanloss provision, will have to set aside additional provision funds, resulting inlower profitability," said the firm.
Inflationposes another risk to profitability. In the event inflation hits 4 percent thisyear, most banks are to face 2-4 percent lower profitability, according toMaybank Kim Eng Securities.
Thisis, however, a worst-case scenario situation, the firms said inflation willlikely stay well under the 4 percent mark while there shouldn't be a majorsurge in interest rates this year by the State Bank of Vietnam (SBV).
Asthe country has been trying to maintain a recovery path, the SBV has everyreason to keep interest rates low to support the economy. Meanwhile, commercialbanks must already employ numerous measures to protect and maintainprofitability.
Thefirm forecast an 8 percent interest rate for most commercial banks and slightlyhigher deposit interest rates at 4.5 percent (from 4 percent in the previousyear), which should not affect businesses and the banking sector in asignificant manner.
Ina draft document to be presented to shareholders in the next meeting, VietnamInternational Commercial Joint Stock Bank (VIB) said it has set a target of 10.5trillion VND in pre-tax revenue, a 31 percent increase from 2021.
TranThu Huong, director of VIB's retail unit, said the target was set based onstrong confidence in a robust recovery of the economy this year, especiallyafter the Government announced a large support package for 2022 and 2023.
Similarly,Vietnam Maritime Commercial Joint Stock Bank (MSB) has set a target of 6.8trillion VND in pre-tax revenue, a 34 percent increase from the previousyear.
Thebank's strategy is to invest and focus on small and medium-sized businesses toboost profitability, as well as digital services to reduce costs, according toNguyen Hoang Linh, MSB's director-general.
Meanwhile,the "Big 4" - Vietcombank, VietinBank, BIDV và Agribank -have set more conservative year-on-year profitability targets withVietcombank at 12 percent and Vietinbank at 10-20 percent.
Vietcombankrecorded 27.4 trillion VND in pre-tax revenue during 2021, a 19 percentincrease year-on-year, making it the most profitable bank in Vietnam./.
VNA
