How do you assess the current situation of banks’ non-interest income?
Compared to the previous period, banks’ non-interest income has seen significant improvement. Banks’ non-interest income is quite diverse, including trade finance, payment services, foreign exchange operations, investment in government bonds, and buying and selling investment securities. Thanks to positive non-interest income, many banks have maintained stable business performance.
How will reducing dependence on credit-based revenue affect the operations of banks?
PGS.TS Dinh Trong Thinh
Despite improvements, it is undeniable that the core business of banks today remains net interest income, mainly dependent on credit. However, promoting non-interest income can be a lifeline for banks, especially during periods of slow credit growth that lead to declines in net interest income, as has been the case recently.
Going forward, forecasts indicate that improving net interest margins will be relatively challenging due to increasing funding costs as deposit rates rise again, likely by 0.5-1% per year from now until the end of the year. Meanwhile, the slow recovery in retail credit demand will force banks to lower lending rates to stay competitive. Therefore, banks must boost non-interest income to improve profitability.
In fact, many banks are optimizing non-credit income sources. This is evident as the proportion of non-interest income has been and continues to be significant in the total income structure of these banks.
Along with the strong development of banking technology, increasing income levels have led to growing demand for new, convenient, modern, fast, and secure banking products and services. Moreover, with globalization and the collaboration of businesses worldwide, international trade has grown rapidly, providing banks with numerous opportunities to develop and expand their services and tap into new customer segments, thereby increasing non-interest income within the total income of Vietnamese banks.
The above benefits confirm that shifting towards increasing non-interest income will enhance sustainable profitability, reduce risks, and improve the competitiveness of banks.
In your opinion, what should banks do to sustainably increase non-interest income?
Banks have many favorable factors to increase non-interest income, such as the stability of the macro-economy, the rising per capita income in Vietnam, and the increasing trust of the populace in the country’s banking system. In addition, the State Bank of Vietnam (SBV) is actively improving the legal framework for the safety standards of the banking system, helping commercial banks operate more safely and healthily. The SBV has also issued many important legal bases to create conditions for commercial banks to develop new products and services to keep up with modern trends in the new technology era. Today, the payment system and trade finance operations in the economy have made remarkable strides.
To promote sustainable non-interest income, it is necessary to continue creating a conducive legal framework for banks to promote and expand modern products and services, especially digital banking services. This will help banks diversify their income sources towards sustainability.
Thank you for your insights!
