Vietnam's banking industry is expected to improve gradually in 2017. Photo: Internet
An improving macroeconomic environment with a stable currency and benign inflation should counteract structural systemic weaknesses of Vietnamese banks, which supports the stable outlook for the sector in 2017, Fitch
Ratings has said in its latest report.
Fitch expects asset quality and funding and liquidity to remain steady as the economy grows steadily. However, structural systemic weaknesses remain, such as thin capital buffers, a large non-performing loan (NPL) stock and weak profitability.
“We believe the NPLs will take time to be resolved, due to various legal impediments. The understatement of problem loans in the low-reported NPL ratios across the system suggests that the capitalization of banks is likely to be weaker than their reported capital ratios”, notes the report.
Banks' reported total capital-adequacy ratios (CAR) were low at end-June 2016, at a respective 12.1% and 9.3% for joint-stock commercial banks and state-owned banks.
Capital buffers will remain under pressure as Basel II is being phased in at a time when internal capital generation remains lethargic.