Currently, few commercial banks are still publishing their business results in 2021, but the figures that a few banks have just announced show that they have good business results. In addition to the core business of credit, the diversification of income from services and digital transformation have also contributed to the increase in the bank’s profits.
Specifically, Agribank reported an estimated pre-tax profit of VND 14 trillion, up around 7% from 2020. Agribank’s credit growth increased by 8.5%, including 70% of loans courses for agricultural development, farmers and rural areas. Although they did not disclose a specific figure, Vietinbank executives said pre-tax profit in 2021 exceeded the target of VND 16.8 trillion. During which, Vietinbank’s 2021 credit growth increased by 12.3% year-on-year, while non-interest income from banking and financial services solutions also surged by 20%.
Similarly, BIDV has just announced a profit of more than 13 trillion VND. Of which, BIDV’s credit growth hit close to 12% on target but accounted for over 13% of economy-wide credit outstanding, leading the market in terms of market share credit. Vietcombank has also completed its plan set at over VND25.5 trillion. Its credit growth increased slightly by almost 15% compared to 2020, and other sources of revenue from services, such as card payment, international payment and commercial payment, also increased by 20 to 24%.
Not only did the large state-owned banks perform well, but the private commercial banks also posted above-plan profits. For example, TPBank made a pre-tax profit of nearly VND6.04 trillion, up 40% from 2020, beating its target by 4%. MSB made an estimated profit of VND 5 trillion, which is double that of 2020. In addition, some commercial banks also recorded a strong increase in profits, thanks to strong credit growth. Specifically, Techcombank forecasts pre-tax profit in 2021 to reach VND23 trillion, up 46% over the same period, driven by strong credit growth of 22%. Sacombank’s profit in 2021 is expected to jump around 30% to VND 4.4 trillion as the credit limit is extended to 10.5%. MB Bank makes an estimated profit of VND 16.5 trillion, up 54% from 2020, due to the 21% credit extension.
Financial experts said banking is a rare industry that has shown growth in recent years, despite the prolonged Covid-19 pandemic. The earnings picture for the banking sector in 2021 remains bright, mainly due to the recovery in the economy’s demand for capital in the last months of 2021. Many commercial banks have had their credit limits extended by the Bank of Vietnam to inject capital into the market. at the service of production and commercial activities. The credit breakthrough at the end of the year was the driving force behind the strong growth in bank profits. According to the latest update, economy-wide credit growth in 2021 reached almost 14%, when it was initially expected to increase only around 12%, said a financial expert.
Bank stocks will magnetize cash flow
Although bank profits remained strong, bank stocks fell sharply in the last six months of 2021. The group of ten major bank stocks on the Ho Chi Minh City Stock Exchange (HoSE) fell nearly 10% on average. Analysts say one of the main reasons for the drop in bank stocks is that investors feared that banks’ business operations would be affected by the impact of the Covid-19 pandemic, particularly bad debt risks are eroding. bank profits.
However, stockbrokers have estimated that the banking sector will have a positive outlook in 2022 when the economy and corporate debt repayment capacity gradually recovers. Moreover, to avoid repeating the same mistakes, many commercial banks have sharply increased risk provisions to cover bad debts. For example, BIDV has a bad debt coverage rate of 235%, the highest in recent years. Similarly, VietinBank has raised its bad debt coverage rate from 132% at the end of 2020 to 171% currently. In particular, Vietcombank has a bad debt coverage rate of up to 424%, the highest level in the banking industry, setting aside 100% of provisions for the entire structured loan balance in accordance with Circular No. 03/2021 of the SBV, two years earlier than prescribed. “If so, bad debts can only occur in weak banks and banks with low reserve reserves,” said one financial expert.
According to Viet Dragon Securities Company (VDS), the supportive monetary policy in 2022 will continue to be maintained in hopes of injecting more money into the economy through credit growth. Combined with the stable short-term liquidity condition, credit is expected to grow vigorously in the first six months of this year, so bank stocks will soon be attracting cash flow again. “Of course, stock prices will see a strong divergence depending on the rate of earnings growth, and that’s a private story for every bank,” said a VDS analyst.
Indeed, last week, when the stock market plunged due to a series of negative news, banking stocks partly showed their role as the first stocks to retain the green color. Experts predict that bank stocks will attract cash flow from investors in the near future.