A total of nine banks out of 28 analysed by Zing News recorded profits in 2023 of less than VND 1,000 billion or about US$41 million. This was two more than in 2022 and may be indicative of broad challenges in the banking sector. There are similar trends among all of these banks–revenue from foreign currency trading has dropped and they’ve had to increase their reserves based on higher credit risks.
Note that the banking industry had a somewhat abnormal 2023. With the economy struggling broadly there was a significant decline in interest in borrowing funds. Furthermore, consumers, after recognising their economy was not perhaps as stable as they would like, started saving a lot with deposits reaching record highs. As a result, banks had lots of cash on hand but nothing to do with it which saw deposit interest rates drop significantly. With a huge cash supply but very little demand, inflation started to become a problem. This led to the State Bank of Vietnam performing a series of treasury bill issuances to try and soak some of it up.
But this could only really be a stop gap and in November, the treasury bill issuances ended and Vietnam’s banks embarked on a wildly aggressive lending spree which saw credit growth jump–for the first ten months of the year the average monthly credit growth was just .74 percent, however, in the last two months of the year it averaged 3.05 percent.
In this context, it’s difficult to predict how the banking industry might perform in 2024, however, these latest results could be a canary in the coal mine.