Hanoi (VNS/VNA) - Profits of the banking industry in the third quarter of2021 would decrease by 19 percent compared to the previous quarter due toslowing credit growth and increasing provision expenses, Yuanta SecuritiesVietnam estimated.

Ina report on Q3 2021 profits of the banking industry, Yuanta said it was not toosurprising about the decline as the credit growth of the whole industry hadslowed down due to the impact of the pandemic.

TheState Bank of Vietnam (SBV)’s data showed by the end of last month, creditgrowth of the entire banking industry was 7.4 percent, of which the rise in thethird quarter of 2021 was driven primarily by loans to pandemic affectedborrowers and corporate bonds.

Accordingly,Yuanta analysts forecast net interest income in Q3 2021 of banks will decreaseby 2 percent compared to the previous quarter and net interest margin (NIM)will be under the same trend as banks had to cut interest rates tosupport customers affected by the pandemic.

Besides,the company also predicted provision expenses of banks in the third quarterthis year would increase by 20 percent compared to the previous quarter,especially at banks with relatively low loan loss reserve (LLR) ratio. However,it noted declining asset quality is inevitable in the context of the ongoingpandemic and the implementation of social distancing.

Accordingto Yuanta, Circular 14/2021/TT-NHNN issued by the SBV allowed banks to extendthe debt restructuring period to June 30, 2022 instead of the original plan ofDecember 31, 2021. Therefore, bad debts, which have been made public, may stillbe at a low level, but it will be better if banks make provisions now to limitthe possibility of asset quality deterioration in the future.

However,the analysts expected credit growth would recover in the fourth quarter of 2021when the economy reopens.

Infact, the credit growth in July and August was more positive than that in Junewith respective rising rates of 0.69 percent and 1.13 percent. 

Thedemand for credit is expected to increase strongly in the last months of theyear, similar to what happened in the fourth quarter of 2020. The SBV has sofar also increased credit growth limit for many commercial banks.

NguyenTuan Anh, Director of the SBV’s Credit Department of Economic Sectors, alsoaffirmed banks haven’t tightened lending, but created favourable conditions forfirms to access bank loans.

Anhsaid the credit growth target this year was at 12 percent, but if necessary,the rate could be adjusted to create favourable conditions for firms.

"Weexpect the central bank will continually loosen monetary policy at least untilthe end of this year, which will help improve banks’ NIM slightly in the fourthquarter of 2021 when credit demand increase again. In addition, banks’ feeincome is also expected to increase since the third quarter of 2021 and thesource will be the main driver to help boost banks’ profits in the fourthquarter," said the Yuanta analysts.

Theexpected loose monetary policy would help cut the lending interestrates next months, the analysts forecast./.