Hanoi (VNS/VNA) - Pre-tax profit growth of the wholebanking industry will decelerate in 2023 and there will be a significantdifference in the growth between small- and large-sized banks, expertsforecast.

The Securities Joint Stock Company of the Joint Stock CommercialBank for Foreign Trade of Vietnam (VCBS) forecast the industry's pre-tax profitin 2023 will grow by only about 10%, much lower than the rate of nearly 35%last year.

Besides, VCBS believed there would be a difference in profitprospects among different groups of banks and this difference would continue tobe stronger in 2024. Specifically, some small-sized banks would continue todecelerate or even grow negatively in 2024 if the real estate market and theglobal macro situation deteriorate, which could cause credit to slow and thedebt repayment ability of borrowers difficult to recover while the Government’ssupporting policies expire.

Similarly, the Ho Chi Minh City Securities Joint Stock Company(HSC) forecast the average profit of a group of banks that HSC was studyingwould increase by only 12-15% in 2023. However, in the last six months of 2023alone, HSC expected the bank group’s profits to increase by more than 20% overthe same period last year.

According to VCBS, one of the main reasons for this decelerationcomes from the difficulties of banks in recovering bad debts due to the frozenreal estate market. Real estate is the main collateral for most loans of banks.

According to Pham Nhu Anh, General Director of Military Bank (MB),in the last six months of 2023 and 2024, the real estate market is expected toface many difficulties and pose potential risks. Many real estate projects arestill in the process of completing legal procedures or have not completedconstruction and handed over apartments to homebuyers as planned. At the sametime, the declining confidence of homebuyers continues to directly affect thedemand for loans, the compliance with payment commitments under purchase andsale contracts with investors and loan repayment commitments with banks.

The above difficulties are forecast to directly affect thestability of the real estate market and a number of related industries such asiron and steel, building materials and construction. The uncertainty wouldreduce the credit quality of the banking industry, Anh said.

However, VCBS expected the bad debt ratio and provisioning levelof banks would not increase dramatically in 2023 thanks to the Government'sDecree No 08/2023/ND-CP supporting the extension of corporate bonds andCircular No 02/2023/TT-NHNN allowing the restructuring of outstandingloans.

By 2024, VCBS forecast the risk of bad debt might increase againand there would be a divergence. Specifically, the group of banks with goodasset quality would record bad debt and debt restructuring at a moderate level.In contrast, banks with a high proportion of loans to real estate and corporatebonds, and low coverage of bad debts might face rising bad debt risks and provisionpressure in 2024.

Besides, VCBS also pointed out another factor affecting thebusiness results of the whole banking industry. It was the decrease innon-interest income in most of the main activities of banks such asservices and securities investment, over the same period last year.

In particular, income from bancassurance, which accounted forabout 30% of banks’ service income, was affected by the decrease in people'sincome and the inspection strengthening of the State management agencies, VCBSsaid, adding after the first four months of this year, new revenue throughthe bancassurance channel of the whole market recorded a decrease of 38%over the same period last year and the profit from insurance premiums for thewhole year was forecast to decrease by 10-15%./.