According to KBSV, good credit recovery will impulse the net interest income. In addition, NIM and non-performing loan ( NPL ) control of the banking industry are expected to become more positive in the year-end period.

In a newly released strategic report, KB Securities (KBSV) said that the banking industry will still cope with the short-term difficulties from headwinds in the corporate bond and insurance markets, make the revenue from Investment banking and insurance services need more time to wait for the market recovery. However, there still have the highlights in the industry's outlook in the second half of 2023.

Credit growth recovered.

In accord with data from the State Bank, as of the end of September 2023, the credit growth of the entire economy reached 6.92% compared to the beginning of the year, reflecting slowing credit growth in most sectors. In general, credit demand is still relatively weak in this economy recession and this unrecovered real estate market .

Among the banks tracked by KBSV, most of them recorded relatively low credit growth in 6M2023, a few banks lending to the real estate domain had more outstanding increases such as TCB (+9.7%YTD), HDB ( +9.3% YTD), VPB (+10.1% YTD), MBB (+10.6% YTD). Besides, the analysis team also noticed a shift in the credit structure of banks from the Science and Technology segment to the Corporate Banking segment when Science and Technology is facing many difficulties due to the impact of the economic downturn.

As stated by KBSV, credit growth will hardly reach the target of 14% but still reach the target level of 10-12% based on expectations that (1) consumption of the science and technology segment will recover at the end of the year; (2) credit demand in industries is more active thanks to import-export activities; (3) The real estate sector is gradually removing legal problems, despite taking more time for the market to reopen.

"Good credit recovery will be the driving force to boost net interest income in the year-end period," the analysis team assessed.

NIM is predicted to bottom in the third quarter and gradually increase.

Cost of capital (CoF) in the first quarter of 2023 increased sharply by 0.94 percentage points compared to the previous quarter, reflecting high-interest rates from the end of 2022. KBSV found that this increase slowed down in the second quarter (+0, 38 percentage points) after interest rate cuts by the State Bank. Accordingly, the state-owned banking group has adjusted the deposit interest rate down by 1.0-1.6%, while the joint-stock commercial bank group also has a decrease of 1.3-1.8%.

The analysis team expects that banks' CoF will begin to improve significantly from the third quarter because the  high cost capital mobilization mainly has terms of 3-6 months; It is expected that interest rates will continue to maintain in the fourth quarter.

Meanwhile, lending interest rate has also decreased relatively in comparison with the beginning of the year, following the Government's direction to support businesses. KBSV believes that lending interest rates will be a downward trend but at a slower pace compared to deposit interest rates owing to resetting lending interest rates every 3-6 months.

On that basis, it is expected that NIM will bottom in the third quarter and begin to recover from the fourth quarter, but cannot yet return to the high base level of 2022. However, the analysis team notes risks to the recovery of NIM can come from (1) The ratio of short-term capital for long-term loans (SFL) falling to 30%, which will cause some banks to readjust their mobilization portfolios, increasing the proportion of long-term deposits, leading to increase CoF; (2) Competition in lending interest rates between banks when Circular 06 is applied (allowing loans from one bank to repay another bank) will impact negatively NIM of the entire industry.

"However, the level of impact when these risks occur may not be large and do not affect the entire system but only occur in a few banks," KBSV said.

The non-performing loans ( NPL ) is expected to peak soon.

According to KBSV, the NPL of 27 banks in the system enhanced from 1.9% in the first quarter to 2.1% in the second quarter, this increase was slower than in the first quarter. The positive point is that the NPL  formation rate of banks is starting to decline, but there is differentiation. Banks affected by the real estate market and difficulties from the science and technology segment such as TCB, and VPB,... will be under greater pressure of non-performing loans ( NPL ) than banks with safe portfolios such as VCB, and ACB.

Bank also supports banks in classifying debt groups for customers, partly helping to reduce tensions with NPLs this year. However, the analysis team estimates that  this debt restructuring scale will be smaller than the one due to the COVID-19 epidemic when Circular 02 only allows group 1 debts to be restructured.

Based on the above analysis, KBSV expects the NPLs to peak in the third quarter and be controlled at the end of the year when the economic outlook is more positive and customers' financial situation is also improved.