While most private commercial banks maintained strong growth momentum in the second quarter of 2021, state-owned commercial banks and a few others such as MBB surprised the market when some banks recorded a decrease in profit.

According to statistics of Maybank Kim Eng Securities Company (MBKE), accumulated in the first 6 months of the year, the pre-tax profit of 17 listed banks increased by 55% over the same period last year, reaching VND 94,000 billion. In which, small-scale banks such as MSB, SSB and LPB led the growth momentum due to low comparison base and/or recognition of prepaid fees from insurance business cooperation.

In contrast, the records of state-owned commercial banks, though not impressive, are not worrisome. These banks are showing compliance with the State Bank's call to reduce profits, thereby allowing them to receive better credit lines.

“If the epidemic situation is well controlled in the third quarter, we believe these banks will be able to free up capital and certainly show a strong recovery in profits in the fourth quarter and 2022.” research group commented.

In terms of growth momentum in the first 6 months, it still mainly comes from net interest income (NII) when accounting for 70-80% of the total operating profit of banks. On average, banks all recorded NII growth of 33% YoY thanks to stable loan growth and NIM expansion to 4.6%.

Average NIM of banks widened to 4.6%

In addition, fee income of banks also grew strongly thanks to insurance cross-selling fees, payment fees and card fees. The banks with the contribution from the exclusive banca partnership (including upfront and commission fees) are the banks with the strongest growth, including VCB, ACB, SHB, LPB, MSB...

Thanks to the outstanding increase in interest income and similar income in the first 6 months, domestic banks have actively increased provisions to write off bad debts and strengthened provisions for loans before the financial crisis. complications of Covid-19. MBKE estimates that the average provisioning rate (also known as the credit rate) of the 17 listed banks will increase to 1.75% in the first half of 2021 (compared to 1.58% in the first half of 2021). 1/2021; 1.5% in the second half of 2020 and the whole of 2020).

The sudden increase in provisioning fees at some banks such as ACB, SHB or EIB is due to the low comparative base. Therefore, even with such an increase, the provisioning ratio of these banks is still below 1.5%.

As for system safety ratios, MBKE estimates that commercial banks are maintaining CAR at 11.3%; average LDR is around 78%. This shows that banks still have significant room to maintain NIM in the second half of 2021 amid falling loan yields (by increasing LDR).

At the same time, by the end of the first 6 months of 2021, the bad debt ratio at listed banks was still maintained at a stable level. On the other hand, thanks to the strong increase in interest income and similar income, domestic banks have actively increased provisioning to strengthen provisions for loan risks.

“As a result, the average NPL coverage ratio has been raised from 60-70% 3 years ago to 125% by the end of 2020 and continues to increase to an average of 150% by the end of the first half of 2021.” MBKE commented.

With the above results, the research team proposed 3 scenarios for bank profits in 2021. Specifically, bank profits increased by 37% with an optimistic scenario; 33% with the base scenario; 25% with the pessimistic scenario.

In which, the basic scenario based on the development of the 4th Covid-19 wave will be controlled in August 2021; vaccination rate reaches 30% of the population (2 doses) by the end of 2021 and 75% in the first half of 2022. Therefore, GDP growth can be maintained at 5.5% in 2021 and reach 6.5- 6.8% in 2022; credit growth will reach 12.5-13% in 2021 and about 14% in 2022.

Three scenarios for profit growth of MBKE bank.