Nearly 94 percent of Vietnamese bankers expect an improved financialperformance, but bad debt levels remain a concern, says a study on thebanking sector.
The latest study on ‘Banking in Emerging MarketsSurvey: Investing for Success' conducted by tax, auditing and financeconsulting firm, E&Y, was released in Hanoi on August 13.
Thisyear's survey includes responses from 50 senior bank executives andmore than 9,000 bank customers across 11 key rapid-growth markets (RGMs)at three stages of financial maturity. The frontier market includesKenya, Nigeria and Vienam; transitional market includes Colombia, Egyptand Indonesia while the established one includes Chile, Malaysia andMexico along with South Africa and Turkey.
In Vietnam, 17 banks and 800 customers responded to the survey.
Thesurvey, which revealed that the outlook for retail and corporatedeposits was bright, also showed strong growth in customer demand andthe broader economy.
An increase in the demand for credit wasexpected but with 76 percent of bankers worried about bad debts, theoutlook for lending was less positive than in their previous survey.
Specifically,Vietnamese banks were the least positive of all RGMs about lending tosmall-and-medium-sized enterprises (SMEs) with the outlook deterioratingthe most in this segment.
However, strong growth in demand was anticipated for retail credit products in both personal loans and credit cards.
"Demandin growth for savings and deposits is higher than in other AsianPacific markets," said Keith Pogson, Managing Partner of E&Y'sFinancial Services – Asia Pacific (APAC) region.
The survey alsorevealed that 15 out of 17 Vietnamese banks expected a slightimprovement in their performance, along with the hope of an improvedeconomy.
The expected demand and growth has affected the mergerand acquisition advisory services the most. The largest increase indemand was in loans to SMEs and corporations.
Keith said higherlending was anticipated in all sectors except construction andcommercial real estate. Lending to the energy sector was also set togrow with government planning to upgrade and build new oil refineriesand invest in renewables.
"Banks would struggle to maintain net interest margins and would have to find new sources of revenue," he added.
Withmost banks concerned with rising bad debts, respondents expected themanaging of credit risks to be their greatest challenge.
This wasthe reason why banks would focus on cost reduction and risk managementto drive profitability. They would seek to grow their business byfocusing on cross-selling and introducing new channels, products andservices.
Referring to the levels of regulation, he saidVietnamese banks expected fewer regulatory mechanisms than otherfrontiers banks and banks in other APAC markets.
However, 9 outof the 17 Vietnamese banks said their regulatory burden would increase.In addition to global regulations, banks in Vietnam were faced with arange of domestic regulatory pressures including a bank deposit rate capof 6 percent on deposits with maturities in less than 6 months. Totalshareholding by foreign investors does not exceed 30 percent of chartercapital of a Vietnamese commercial bank.
He said that among APACbanks, Vietnamese are the most positive about the impact of QuantitativeEasing (QE) tapering off. Twelve out of 17 Vietnamese banks expected anincrease in the flow of foreign investments.
The comparativestrength of Vietnam was also highlighted by its declining sovereignspreads relative to other APAC and frontier markets.
Of thosebanks expecting change, 60 percent believed it would be driven byacquisition of smaller banks by larger domestic banks.
On the question of foreign competition, the bankers believed Japanese and European banks were the greatest threats.
Healso said that a greater portion of Vietnamese respondents expectedtheir loan loss provisions to increase over the next 12 months thanrespondents from other frontier APAC banks.-VNA
The latest study on ‘Banking in Emerging MarketsSurvey: Investing for Success' conducted by tax, auditing and financeconsulting firm, E&Y, was released in Hanoi on August 13.
Thisyear's survey includes responses from 50 senior bank executives andmore than 9,000 bank customers across 11 key rapid-growth markets (RGMs)at three stages of financial maturity. The frontier market includesKenya, Nigeria and Vienam; transitional market includes Colombia, Egyptand Indonesia while the established one includes Chile, Malaysia andMexico along with South Africa and Turkey.
In Vietnam, 17 banks and 800 customers responded to the survey.
Thesurvey, which revealed that the outlook for retail and corporatedeposits was bright, also showed strong growth in customer demand andthe broader economy.
An increase in the demand for credit wasexpected but with 76 percent of bankers worried about bad debts, theoutlook for lending was less positive than in their previous survey.
Specifically,Vietnamese banks were the least positive of all RGMs about lending tosmall-and-medium-sized enterprises (SMEs) with the outlook deterioratingthe most in this segment.
However, strong growth in demand was anticipated for retail credit products in both personal loans and credit cards.
"Demandin growth for savings and deposits is higher than in other AsianPacific markets," said Keith Pogson, Managing Partner of E&Y'sFinancial Services – Asia Pacific (APAC) region.
The survey alsorevealed that 15 out of 17 Vietnamese banks expected a slightimprovement in their performance, along with the hope of an improvedeconomy.
The expected demand and growth has affected the mergerand acquisition advisory services the most. The largest increase indemand was in loans to SMEs and corporations.
Keith said higherlending was anticipated in all sectors except construction andcommercial real estate. Lending to the energy sector was also set togrow with government planning to upgrade and build new oil refineriesand invest in renewables.
"Banks would struggle to maintain net interest margins and would have to find new sources of revenue," he added.
Withmost banks concerned with rising bad debts, respondents expected themanaging of credit risks to be their greatest challenge.
This wasthe reason why banks would focus on cost reduction and risk managementto drive profitability. They would seek to grow their business byfocusing on cross-selling and introducing new channels, products andservices.
Referring to the levels of regulation, he saidVietnamese banks expected fewer regulatory mechanisms than otherfrontiers banks and banks in other APAC markets.
However, 9 outof the 17 Vietnamese banks said their regulatory burden would increase.In addition to global regulations, banks in Vietnam were faced with arange of domestic regulatory pressures including a bank deposit rate capof 6 percent on deposits with maturities in less than 6 months. Totalshareholding by foreign investors does not exceed 30 percent of chartercapital of a Vietnamese commercial bank.
He said that among APACbanks, Vietnamese are the most positive about the impact of QuantitativeEasing (QE) tapering off. Twelve out of 17 Vietnamese banks expected anincrease in the flow of foreign investments.
The comparativestrength of Vietnam was also highlighted by its declining sovereignspreads relative to other APAC and frontier markets.
Of thosebanks expecting change, 60 percent believed it would be driven byacquisition of smaller banks by larger domestic banks.
On the question of foreign competition, the bankers believed Japanese and European banks were the greatest threats.
Healso said that a greater portion of Vietnamese respondents expectedtheir loan loss provisions to increase over the next 12 months thanrespondents from other frontier APAC banks.-VNA
