, Vietnam

Vietnamese banks’ profits to improve: Moody’s

Higher yields from their retail loans will push up earnings.

The profitability of three Vietnamese banks—Ho Chi Minh City Development JSC Bank (HDBank), Southeast Asia Commercial Joint Stock Bank (SeABank), and JSC Bank for Investment & Development of Vietnam (BIDV)—are sighted to improve over the next 12 - 18 months thanks to higher loan yields as well as improvement in asset quality, reports Moody’s Investors Service.

Higher yields from their loans to individuals and small and medium enterprises (SMEs) will drive profits up, the report noted. Meanwhile, for BIDV and HDBank, improvements in asset quality as the banks fully resolve their stock of gross VAMC bonds in 2020 will also support earnings.

Capital will remain stable across all three banks because internal capital generation will support asset growth.

Moody's further expects asset quality to remain largely stable at the three banks amidst the supportive economic environment in Vietnam. Asset quality improved steadily across all three banks in recent years, the report noted, with the problem loans ratio—which include nonperforming loans and gross bonds issued by the Vietnam Asset Management Company (VAMC)—declining to an average of 1.9% at the three banks as of the end of 2020. This is down from 2.2% as of the end-2019 and 3.8% as of end-218.

The three banks have also been building up their problem loans coverage, which averaged around 67% as of the end of 2020, higher than the 57% as of the end of 2018.

Photo courtesy of Marcus Nguyen (Pexels)

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