Dr. Nguyen Anh Vu – Head of Finance Department at Banking University of Ho Chi Minh City speaking at a symposium. Photo: Cat Lam
|
The first prospect is the growth rate of the economy. Vietnam remains among the top performers in Asia. In 2023, the GDP growth rate exceeded 5%. The IMF forecasts that Vietnam will continue to achieve a growth rate of 5.8% in 2024.
Furthermore, the average per capita income in Vietnam has exceeded 4,000 USD. The population has also crossed the 100 million mark. Vietnam is in the golden population group, with the 15-59 age group accounting for 62.2%.
Educational attainment is increasing, and people’s financial literacy is improving, leading to an increase in demand for financial services. The changing saving and spending behaviors of the younger generation (YOLO) are driving increased consumption.
All these factors create significant potential in the retail banking sector.
The total assets of the banking industry are over 20 million trillion VND, with a CAGR of about 13% during the period 2013-2023. Commercial banks account for 93.2%, insurance companies account for 4.4%…. It is evident that the banking sector plays a major role in financial institutions.
Experts believe that there are several supporting factors for net interest margin (NIM) growth, which are expected to be sustained in the future.
Firstly, deposit interest rates are very low. The 12-month term deposit rate is below 5% and is expected to continue to be maintained.
The non-term deposit ratio (CASA) is also trending upwards, mainly due to changes in non-cash payment methods. This leads to low funding costs and the maintenance of a high NIM ratio in the future.
The digital economy presents great opportunities for banks to enhance digital transformation, improve customer experiences, and effectively leverage data and customer behavior. Banks can also increase revenue through insurance advisory fees and product distribution commissions.
Banks can finance and provide capital for green projects and ESG projects. The profitability of these projects, adjusted for risks, also has potential. Green finance offers many opportunities for banks to pursue.
The Revised Commercial Bank Law recently passed also brings many advantages for the banking industry. Simplifying procedures, assisting in handling small loans, creating a legal framework for digital banking, and addressing bad debts.
However, the banking industry still faces many challenges. The first challenge is the increasing amount of non-performing loans. Non-performing loans will differentiate among banks, with banks serving larger customers being at higher risk, while retail banks will diversify risks.
Secondly, strict control over insurance product distribution channels also contributes to declining profits.
Thirdly, there are ongoing trials related to the stock market and the banking industry.
