Banking system enters 2017 with optimistic expectation of a stable outlook

 

The survey was conducted between November 25-December 13 2016, with the participation of all credit institutions and 63 SBV municipal braches, the ratio who answered was 89%. The survey used balance methods for analysis.

The survey showed a notable improvement in the internal and external business environment and promised continuous improvement in 2017, creating a background for the development of the banking sector in the next stage.

According to the assessment of credit institutions, internal factors and the business environment improved noticeably, and the demand of the economy on banking products and services strongly increased. Credit institutions expected the objective and subjective factors of the business environment to continue to improve in 2017.  

According to credit institutions, the general business conditions of the banking sector continuously improved in each quarter of 2016 and is expected to improve in 2017.

The average expectation on profit growth before tax of 2016 was estimated at 8.27%, lower than the 14.4% recorded in 2015 and previous quarters, but higher than that of the same period of 2015.

It is estimated that in 2017, 89.5% of credit institutions expect to attain improved profit growth as compared to 2016 and the average growth level is projected to reach 13.4%, higher than that of estimated level in 2016, of which the net income from profit is expected to growth by 12.7%, net income from fees and services is expected to increase by 16.57%, and net income from self-employed businesses are estimated to increase by 5.25%.

Demand increases and downward trend in product and service prices remains

Contrary to the increasing trend of banking products and service prices in the survey of December 2015, the analysis of results of quarterly surveys in 2016 show that the trend among credit institutions has been a reduction in the average price of their products and services, especially for interest rates to support economic growth. The trend for the price of banking products and services remaining stable is forecasted to be continue in the first Quarter of 2017, with 52% of credit institutions planning to keep the average price of their products and services unchanged; 21.3% planning to slightly reduce the price, and 26.7% planning to increase the average price of their products and services.

At the end of 2016, 85% of credit institutions had assessed the overall risk of various client groups, of which 69% assessed the risk at moderate levels and 16% saw the risk at low levels, while 15% said the risk was at a high level.

Regarding the risk from client groups, the group of credit institutions continued to be seen as the lowest risk clients, followed by the security market, while the highest risk were groups of private clients.

Assessing the risk possibility of various groups of clients in the first Quarter of 2017, 73% of credit institutions expected the risk would remain stable, 8.4% foresaw a reduction, while 19.3% expected the risk to increase.

Overall for 2017, 54% of credit institutions forecast the risk situation to remain stable, 16% said it would reduce while 30% forecast an increase.

Almost all credit institutions predicted their NPL ratio in the fourth Quarter of 2016 be unchanged or reduce as compared to the third Quarter of 2016. They continued to expect the NPL ratio to remain stable or reduce in the first Quarter of 2017 and go down by the end of 2017.

The liquidity will be improved and remain good

According to the assessment of the credit institutions, the liquidity of the banking system continues to improve in the fourth Quarter of 2016, and it remained in a good state for both foreign and domestic currencies. As to the overall assessment for 2016, 96% of credit institutions said that their liquidity had been improved or remained unchanged as compared to 2015, of which 15–25% of those assessed said that their liquidity had been significantly improved.

Regarding the outlook for liquidity in the first Quarter of 2017, 35–39% of credit institutions expected liquidity would be improved, 55 -58% believed the liquidity of the system will continue to remain strong at the current time for both VND and foreign currencies, despite the Lunar New Year coming. For the whole of 2017, most banks expect the liquidity of the whole system to continue to be encouraging and positive for both domestic and foreign currencies.

Interest rates expected to be stable in 2017

Interest rates are expected by credit institutions to be stable in 2017. Familiar with the results of a survey at the end of 2015, a few credit institutions expected interest rates to increase at a marginal pace (an average of 0.2%) in 2017. However, the practical movement of interest rates of 2016 showed stablity in 2016. This is a noticeable achievement by the SBV in 2016 monetary policy management which contributed significantly to economic recovery and growth and bringing benefits to citizens and enterprises.

Capital mobilization expected to maintain stable growth with the SBV success of anti-Dollarization

The survey has reflected the optimism of credit institutions about the possibility of mobilizing capital in 2017 in line with the forecast of a stable macroeconomic environment and higher economic growth, stable currency and inflation being safely maintained and supporting banking liquidity.

The mobilizing capital of the whole system is expected to increase on average by 4.57%, of which VND capital increases by 5.13%, foreign currency increases by 0.75% in the first Quarter of 2017. In 2017, the mobilizing capital will increase by 16.76%, of which mobilizing capital in VND goes up by 18.12%, and in foreign currencies increases by 0.95%.

The motivation for mobilizing capital to increase is the expectation of increasing mobilizing capital in VND while the capital mobility in foreign currencies will go up insignificantly (below 1%). The mobilizing capital in foreign currencies increase was almost the same as mobilizing capital in VND in 2015. The expectation is relatively close and in line with practical movements, reflecting the accomplishment of the SBV in it's efforts at anti-dollarization, and reducing the hoarding of foreign currencies.

The outstanding credit of the banking system is expected by credit institutions to grow by 4.1%, of which the loans in VND is estimated to increase by 4.29% and loans in foreign currencies increase by 4.52% in the first Quarter of 2017 as compared to the previous quarter. Outstanding credit will increase by 19.12% for the whole year of 2017, of which the lending in VND is expected to increase by 20.19% and in foreign currencies by 10.01%.

The labor market of the banking system promises to be busy and exciting in 2017

 

Table: The number of full time staff at credit institutions

Unit: % of credit institutions who answered the survey

 

	In short	Good	Abundant			Balancing ratio
As compared to recent demand (at Quarter IV, 2016)	25.6	73.3	1.2			24.4
	Sharply increase	Slightly increase	Unchanged	slightly decrease	Sharply decrease	Balanced
At end of Q IV/ 2016 as compared to end of QIII/2016	5.7	44.8	37.9	11.5	0.0	22.4
Estimated for end of QI/2017 as compared to end of QIV/2016	7.0	39.5	52.3	1.2	0.0	26.2
The assessment at end of 2016 as compared to end 2015	13.8	51.7	26.4	6.9	1.1	35.1
Estimated for end of 2017 as compared to end of 2016	14.3	57.1	27.4	1.2	0.0	42.3

 

Up to the end of 2016, 25.6% credit institutions said that they were short of labor to meet recent staff demand, despite of the fact that 50.5% credit institutions had employed workers in the fourth Quarter Of 2016. The banking system's labor market in 2017 promises to be exciting, with 71% of credit institutions planning to employ more workers.

VMH