Amidst Earnings Announcement, Concerns about Capital Adequacy Remains

Diep Nguyen

15:50 03/10/2018

BizLIVE -

Thanks to improved financial efficiency, progresses made in bad debt resolution, effective digitization and thriving bancassurance partnerships, bank stocks have become attractive again.

Amidst Earnings Announcement, Concerns about Capital Adequacy Remains
According to StoxPlus in the latest report, Vietnamese banks have been seeing positive news, one after another. 
Over the first half of 2018, the sector witnessed VND 35,524.84 bn, or USD1.53bn in net profit, equivalent to 64% of the previous years’ income. Thanks to improved financial efficiency, progresses made in bad debt resolution, effective digitization and thriving bancassurance partnerships, bank stocks have become attractive again. By September 2018, the sector saw its stock price performance rising by 22% since the start of the year.
In August 2018, Vietnam earns an upgrade in sovereign rating, from B1 to Ba3 at Moody’s and from ‘BB-‘ to ‘BB’ at Fitch, thanks to strong fundamentals, healthy export incomes, growth potential and lowering government debt levels. In tandem, 14 banks also got their credit rating upgrades at Moody’s. Overall, banks have come back stronger in 2017 and are looking forward to an equally rewarding 2018.
Amid the cheers, words of caution were voiced. The problem of capital adequacy remains and with the ongoing strong credit growth, is getting worsened. In 2017, only six out of 14 banks managed to raise their charter capital by USD613mn (41% of planned).
According to Moody’s, given the current credit growth, Vietnamese banks will need an approximate additional US$7-9bn to ensure Tier 1 capital ratios at 11% in 2018 and 2019. Without external capital injections, the Tier 1 capital adequacy will reduce to 8% for JSCBs and 6.1% for SOCBs by end of 2019, from 9.4% and 6.9% from the end of 2017.

DIEP NGUYEN