Slower credit growth makes banks set modest targets in 2024

Slower than expected credit growth and a large number of non-performing loans have resulted in conservative growth targets among commercial banks for 2024, said industry insiders and experts. 

In 2023, the country's largest commercial banks, including state-owned Agribank, Vietcombank, Vietinbank and BIDV, reported nearly 25 billion USD in profit. Despite the positive figure, banks were reported to have scaled back on their growth targets this year, citing cautious approaches and higher loss provisions setup compared to previous years. 

Last year, VPBank and Techcombank dropped out of the top banks in terms of profit in USD, while state-owned banks dominated compared to the private group in profit rankings, thanks to a cautious trend in setting up credit loss provisions in previous years.

Vietcombank topped the chart with a consolidated pre-tax profit of over 41.2 trillion VND (1.68 billion USD), a 10% increase year-on-year, followed by BIDV with a consolidated pre-tax profit of 27.6 trillion VND, a 20% increase year-on-year. 

However, industry insiders said the core operating income from credit for the two banks did not show substantial growth in the past year. For example, in 2023, Vietcombank's net interest income, the main source of income, only increased slightly by 0.7% to 53.6 trillion VND despite the credit portfolio expanding 10.6% compared to the end of 2022.

As a result, a reduction in risk provision costs has been a factor that helped Vietcombank's pre-tax profit continue to grow, despite a 2.2% decrease in net profit from business operations in 2023 compared to 2022. At BIDV, besides reducing risk provision costs, non-credit sources such as services, foreign exchange business, and securities trading investment have been driving forces behind higher profits compared to the previous year.

Meanwhile, VietinBank has been less affected by credit issues. By the end of last year, the total outstanding loans reached over 1.5 quadrillion VND, a 15% increase compared to the end of 2022. The bank said positive credit growth from the beginning of the year and sustained, steady growth in non-interest income helped the bank achieve a profit of 25 trillion VND, a 20% increase year-on-year. Agribank also reported a profit of approximately 25 trillion VND, exceeding the yearly planned target by 5-6%.

Among the private banks, MB has been the leader of the pack with a pre-tax profit of 26.3 trillion, a 16% increase year-on-year with a credit growth rate of 28%, significantly higher than the industry average. 

Other top performers included Techcombank and ACB despite minor setbacks that prevented them from reaching the 1 billion USD profit mark. For example, last year Techcombank reported a 10% decrease in profits due to a reduction in credit income while having to increase provisions significantly. The bank ended 2023 with a profit of 22.9 trillion VND.

Meanwhile, ACB reported a profit of 20 trillion VND for the first time, thanks to reduced operational costs, growth in credit revenue and profit from securities trading investments.

Banks, however, remained cautious about growth targets as they entered 2024.

In the latest survey by the State Bank of Vietnam (SBV), banks said they expected a more favourable business situation for 2024. Pre-tax profits may recover more slowly than business conditions. 
As a result, Vietcombank aims for a profit of nearly 2 billion USD this year, a 10% increase compared to 2023, with total assets by the end of the year expected to increase by more than 8%, credit growth to be over 12%, and bad debt below 1.5%. 

BIDV has set out some key indicators, such as managing outstanding credit according to the credit limit  assigned by the central bank, expecting a 14% increase while leaving profit targets open. Vietinbank has set key business targets for this year, including total assets increasing by 5-10%; credit growth of 14% and reducing bad debt ratio to below 1.8%.

Meanwhile, MB has set three objectives this year: achieving a profit target of 30 trillion VND, serving 30 million customers and securing a place in the country's top 3 banks in terms of service quality and efficiency./.