SSI Research has released an update on the outlook for the banking group of stocks, with both advantages and possible risks appearing in the near future.

To control inflation, the State Bank of Vietnam (SBV) may exercise more caution in extending credit limits in the second half. In the event of this extension being lower than in recent years, SSI Research expects full-year credit growth to reach or exceed 14 per cent, reflecting the impact of inflation.

Net interest margin (NIM) is forecast to increase at banks like the Sai Gon Thuong Tin Commercial Joint Stock Bank (STB), the Asia Commercial Bank (ACB), the Vietnam Prosperity Joint Stock Commercial Bank (VPB), and the Military Commercial Joint Stock Bank (MBB), while it may decrease at banks that depend on interbank loans. The NIM at other banks is forecast to remain stable. The average NIM at banks in the study is forecast to stabilize at 3.8 per cent; higher than the pre-Covid level of 3.5 per cent.

Positive factors affecting the NIM include an increase in current account savings accounts (CASA) and the loan-to-deposit ratio (LDR), while negative factors include the maximum ratio of short-term funding for medium and long-term loans coming down to 30 per cent, the proportion of high-yield loans out of total outstanding loans declining, and some banks not having much room to increase their LDR.

Credit risks related to the real estate sector and the corporate bond market should continue to be closely monitored, as banks may not have made much provision in advance for these.

Risks relating to the real estate sector may only emerge from 2023. The possibility of a sharp correction in banking stocks in the second half of 2022 is therefore not great, especially in the context of the SBV considering extending credit growth limits and bank profits still growing.

SSI Research believes there are long-term investment opportunities in ACB and Vietcombank (VCB), which have prudent lending practices and a relatively low proportion of outstanding loans in the real estate sector and corporate bonds. MBB and STB, meanwhile, may be suitable for short-term trading opportunities.