In a recently-released report on Vietnam’s banking industry, FiinGroup wrote that the after-tax profits of the 27 listed banks rose 51 per cent in the first quarter of 2022 compared to the previous quarter and 31 per cent year-on-year.

After-tax profits rose sharply compared to increases in total operating income due to a 26 per cent decline in provision expenses and an 8.1 per cent decrease in operating expenses compared to the fourth quarter of 2021.

However, excluding the VND5.558 trillion ($237 million) in after-tax profit recorded by the Vietnam Prosperity Joint Stock Commercial Bank (VPB), the total figure grew only 35.7 per cent quarter-on-quarter and 17.7 per cent year-on-year.

In terms of targets, by the end of the first quarter of 2022, credit at the 27 listed banks increased by 6.6 per cent, double the figure year-on-year, of which customer loans grew 6.4 per cent and corporate bonds 13.8 per cent.

Currently, according to FiinGroup’s figures, 26 of the 27 listed banks aim to grow their after-tax profits by 33 per cent in 2022. Banks will face many challenges in achieving this goal, however, because of three reasons.

Firstly, it is difficult for net interest income (NIM) to increase strongly when supporting factors will equal an increase in cost of funds (COF), while credit in subsequent quarters is unlikely to remains as high as in the first quarter due to the possibility of limited credit space.

Second, on-balance sheet bad debts will continue to increase now the debt restructuring deadline expired on June 30, 2022 under Circular No. 14/2021/TT-NHNN. And third, the health of real estate businesses will have an impact.

In the stock market, although the 2022 profit growth target is challenging, after a sharp adjustment, FiinGroup believes that the banking sector’s valuation has become more attractive at 1.7x; lower than the five-year average of 2x.