Tough year expected for banks in 2023

Securities firm VNDirect said that the State Bank of Vietnam has increased policy rates by 200 basis points and this rate hike will inevitably put pressure on banks’ net interest margin this year as cost of funds rises and a full pass-through into lending rates is unlikely.

Meanwhile, the stagnant property market and sluggish corporate bond recovery will stress asset quality and liquidity. All in all, the tightening monetary policy and macro uncertainties will affect the outlook of the sector in 2023.

In this context, VNDirect expects HDBank’s earnings growth will reach 16-20 per cent against the same period in financial year 2023-2024, with a compound annual growth rate (CAGR) for FY19-21 of 30 per cent. This figure is higher than the industry forecast (10.4 per cent) as HDBank is likely to receive a better credit growth limit than other banks. Accordingly, the bank’s credit growth will reach 20 per cent in 2023.

In the long-term, VNDirect remains upbeat about the outlook of HDBank as it adopts the lending model focusing on the high demand in rural areas. Meanwhile, its strong insurance operations can support its fee income growth. Along with good asset quality, the bank also posted a good return rate of 23 per cent compared to the 20 percent of the whole industry in the period of 2020-2022.

VNDirect estimates VIB’s credit growth to slow down to 10-15 per cent over the next two financial years. With the current higher interest rate environment and the ongoing liquidity constraints, VIB’s earnings growth will soften to 15-18 per cent on-year across FY23-24F (CAGR for FY19-21 of 40 per cent). However, in the long run, analysts still like VIB for its strong position in Vietnam’s retail banking arena.

Similarly, VNDirect also predicts that in 2023-2024, VietinBank (HSX:CTG) will achieve good credit growth of about 10 per cent, 1-2 per cent lower than the expectation for the whole system. VietinBank's net profit is estimated to grow 10.2 per cent in 2023 and 18 per cent in 2024, with return on equity of 15.5 percent and 16 per cent respectively.

MB Securities (MBS) forecasts that VietinBank's consolidated pre-tax profit in 2023 will grow by 13.8 percent to $983.64 million, almost equivalent to 2022 profits.

VNDirect also issued a conservative prediction for Techcombank (HSX:TCB) in FY23-24 due to industry obstacles and close supervision in the bond and real estate markets. Techcombank's credit growth will reach 10 per cent in 2023 (CAGR FY19-21 of 25 per cent). The bank will have to increase provisioning to prevent bad debt risks. All in all, VNDirect expects Techcombank's net profit to grow 12-14 per cent on-year over the next two years.

With regards to Vietcombank (HSX:VCB), MBS forecasts that its total operating income will reach nearly $2.67 billion and $2.97 billion in the upcoming financial year, up 10.8 per cent and 11 per cent respectively.

Pre-tax profit in 2022 is expected to have reached $1.43 billion and could hit $1.75 billion in FY 22-23, up 22.7 per cent and 22.2 percent respectively.

MBS projects ACB's pre-tax profit to have hit $722.32 million in 2022, up 41.7 per cent over the same period last year. However, this figure could decelerate in 2023, reaching $782.24 million, up 8.6 per cent.