Sector Report

Sector Report
1Q19 Vietnam banking sector earnings review

Banking sector increased by 8.4% YTD, slightly underperforming the VN Index (+10.6% as of 20 May 2019). Only EIB, VCB, and TPB outperformed the VN Index. Performance of banking sector is still in line with our Neutral view for this sector in 2019. Credit growth reached +4.44% YTD as of 29 April 2019 vs. 4.3% YTD as of April 2018 and vs. 2019 credit growth guidance of 14% YoY. By the end of March 2019, reported NPL ratio was 2.02% & adjusted NPL ratio (including VAMC bonds + potential bad debt) was 5.88%. As of May 2019, there are 7 banks that comply with Basel II: VCB, VIB, OCB, MBB, VPB, TPB, and ACB


Vietnam banking sector Update: Draft replacement of Circular 36/2014 & potential impact on banking sector
The central bank of Vietnam has proposed a draft circular to replace Circular 36/2014/TT-NHNN, which regulates the operational safety ratios of banks. Unlike Circular 36, which covers both banks and finance companies, this new circular will only cover the operation of commercial banks. Meanwhile, finance companies will be regulated through other legal documents.


Banking Sector Update: Consumer finance: Tightening cash loan practices

The State Bank of Vietnam is seeking industry opinions in order to gain insights for the draft Circular amendment to Circular No. 43/2016/TT-NHNN of the Governor of the State Bank of Vietnam. The survey regarding the Circular is about consumer lending regulations for finance companies.


Banking Sector Update: 9M18 Review, Gazing into 2019

The banking sector in Q3 continued to maintain strong profit performance recorded earlier in 1H2018 (+52.2% YoY) and in line with our forecast, as stated in our previous banking sector updates. This is represented within the business results of the Top 12 listed banks under our coverage, with the total PBT up to Q3increasing+39% YoY. Such PBT growth was driven by a robust growth of +19.8% YoY in net interest income (NII), and a +40.5% YoY growth in Non-interest income (Non-NII).

Among the top 12 listed banks under our coverage, only LPB recorded losses due to rising interest expenses and weak investment results. CTG and VPB are two banks with single digit earnings growth due to soaring costs for credit provisions. Other banks booked very high earnings growth. 


Oil & gas sector quick Update note: Impact of oil price downtrend on earnings

From the peak in early October 2018, the Brent crude oil price plunged by almost -35% to the current level of below $60/bbl. The sharp oil price drop could be attributed to the following: (1) Iranian output did not decrease significantly, as per US sanctions the US still allows a number of its allies to continue import crude from Iran and (2) the demand growth forecast for crude in 2018/2019 was trimmed by both OPEC and IEA, as these organizations forecasted slower global economic growth and trade war concerns and (3) the market has become more skeptical regarding the effectiveness of the agreement to cut 2019 output by OPEC and its allies while there is always a potential supply hike from shale oil.