Steady margins and higher trade gains buoy Vietnamese banks’ profits in H2

Asset quality risks are expected to remain contained, Fitch Ratings said.

Leading banks in Vietnam are likely to sustain their profitability in the second half of 2024, with their steady margins and higher trading gains expected to offset higher impairment costs, according to Fitch Ratings.

“We also believe that recent liquidity tightness in the sector is likely to ease when global policy rates start to decline, limiting pressure on margins, while loan growth should remain broadly healthy on the back of sustained economic momentum,” the ratings agency said in a report.

Asset quality risks arising from Vietnam’s real estate sector is likely to remain contained on strong backing from the banks and authorities.

Many local banks– notably private sector banks– have been eager to fill developers’ refinancing gaps, noted Fitch. The aggregate real estate-related exposure of banks rose to 19% of their loans by end-2023, from just 15% at end-2022. This excludes residential mortgages.

“Over the medium term, banks’ large appetite for risk and thin capitalisation are likely to remain key credit considerations and constraints on their standalone credit ratings,” Fitch Ratings said.

In an earlier report, Fitch Ratings said that a landmark billion-dollar corruption scandal involving a local real estate tycoon is not expected to present new contagion risks to the country’s banking system but does expose financial supervisory shortcomings.