The total pre-tax profit of Vietnam’s 25 largest listed banks fell 3.1% y/y to VND61.6 trillion ($2.6 billion) in the second quarter of this year, VNDirect reported on August 10.

The net interest income (NIM) ratio of these banks in the second quarter 2023 saw a y/y decrease of 0.32 percentage points, settling at 3.41%, says VNDirect.

Among the surveyed banks, 19 out of 25 saw a substantial drop in NIM during the second quarter. However, within the category of medium and large banks, Sacombank, VIB, and VietinBank stood out as they managed to maintain higher NIMs compared to the same period in the preceding year. VIB and VietinBank were able to leverage interbank capital effectively, marked by a respective increase of 4% and 4.9% in the ratio of interbank capital to total capital.

VNDirect analysts noted that Sacombank exhibited a robust improvement in NIM for 2023, with pressure on accrued interest eased. Conversely, VPBank, Techcombank, LPBank, and TPBank saw their NIMs decline most significantly due to ongoing challenges in liquidity within the corporate bond and real estate markets.

The current account savings account (CASA) ratio for the entire banking industry demonstrated an upturn, increasing from 17.6% at the end of the first quarter 2023 to 18.2% at the end of the second quarter 2023. This shift was attributed to the continuous reduction in deposit interest rates following the central bank’s series of policy interest rate cuts, Vietnam Plus reports.

VnDirect projected that the cost of capital would decrease more substantially as the impact of the third and fourth rate cuts in the second quarter of 2023, becomes fully effective in the latter half of the year. However, the analysts cautioned that an immediate improvement in banks' NIM is not expected, given that interest rate reductions remain a primary measure to stimulate economic activity.

For the second half of the year, analysts predict that banks with high personal loan ratios, low loan-to-deposit ratios (LDRs), and low foreign currency capital will likely have more opportunities to enhance NIM compared to their counterparts.

The report also highlighted that by the end of the second quarter, credit in the entire banking system had risen by 4.7% compared to the beginning of the year. This growth rate was lower than the 9.4% recorded at the end of the second quarter 2022 but significantly higher than the 3.17% at the end of May 2023.

During the second quarter 2023, banks with large exposures to the real estate industry, such as Techcombank and HDBank, experienced sluggish credit growth due to the challenging state of the real estate market. Conversely, banks with a high proportion of retail lending achieved the best credit growth in the same period, signalling a mild recovery in consumer demand after the recent economic malaise.

In the latter half of the year, VNDirect anticipates that banks with a significant share of retail lending, such as VIB and ACB, will have ample opportunities to bolster credit growth as Vietnam gradually enters an initial recovery phase. The World Bank predicts that Vietnam’s growth will accelerate to 4.7% this year from 3.3% last year and continue to accelerate for the next two years.

Conversely, banks with a notable exposure to real estate loans might encounter difficulties extending credit as Circular 06/2023 (effective from September 2023) could restrict firms' access to capital.