Banks’ NIM likely to compress into FY22F

Banks, with the advantages of lower funding cost on high CASA ratio or higher credit growth, continued to maintain or expand their NIMs in 9M21, such as SHB 105bp...

Vietnam commercial banks continued to report asset yield contractions to support Covid-19 afflicted clients, as banks did in 2020, due to interest payment reductions/exemptions and lending interest rates reductions. The listed state-owned enterprise (SOE) banks recorded an average yield decline of 55bp in 9M21 (-75bp YoY), while the listed private banks posted an average yield decline of 47bp in 9M21 (-72bp YoY). 

Implementing Resolution 63/NQ-CP of the Government and the direction of the State Bank of Vietnam, banks have agreed to reduce the lending interest rate applied from 15 Jul 2021 to the end of 2021 with the total amount of interest reduced for customers is estimated at VND20,613bn. Until the end of October 16 2021, commercial banks have effectively reduced lending interest rates with the total amount of accumulated interest has decreased for customers was VND15,559bn, accounting for 75.48% commitment. At end-9M21, restructured loans of ACB, TCB, VIB, TPB, VCB, VPB, BID, CTG, HDB, and MBB totaled VND82,441bn (0.8% of total system credit at end-3Q21).

Therefore, the listed SOE banks’ average annualized asset yield dropped to 5.8% in 9M21 (from 6.4% in 2020), while the listed private banks’ average annualized asset yield fell to 8.3% in 9M21 (from 8.7% in 2020). All banks’ asset yields dropped in 9M21.

Average listed SOE banks’ cost of fund (COF) fell by 56bp to 3.3% in 9M21 (- 85bp YoY); while average listed private banks recorded a 76bp decrease in COF to 3.9% in 9M21 (-106bp YoY). The SBV’s loosening monetary policy helped save banks’ funding costs. 6M term deposit rate around 4-6% in 9M21, dropped 10% from 14-15% in 2010- 2011– the largest decline in Southeast Asia. The main reason was the inflation has been kept under control. 

Between reduction of COF and asset yield, net interest margin (NIM) of listed SOE banks slightly downed 11bp to 3.0% in 9M21 (32bp YoY). The average NIM of listed private banks recorded a 1bp increase to 4.6% in 9M21 (28bp YoY), but the NIM of each listed private bank varied between compression and expansion.  

VNDirect observed that banks, with the advantages of lower funding cost on high CASA ratio or higher credit growth, continued to maintain or expand their NIMs in 9M21 (SHB 105bp, TCB 75bp, BID 72bp, ACB 67bp). Some listed private banks’ NIMs performed positively YoY in 9M21. In addition, this stock company forecasted NIM in 4Q21 will be the same as 3Q21, so it believed that banks’ NIM would improve in 2021F thanks to higher NIM in 1H21.