Yuanta Securities Vietnam (YSVN) has an evaluation report on the banking trade.
Based on analysts, the second-quarter revenue of the entire trade was pushed by internet curiosity earnings, elevated price earnings and excessive unhealthy debt restoration. Nevertheless, banks have additionally elevated provisioning to restrict deterioration in asset high quality – this is essential. Complete provision was 33 trillion dong (up 55% qoq and 83% yoy).
“We view this as a optimistic sign as 1) a deterioration within the high quality of belongings affected by the pandemic will happen and a couple of) prudent provisioning will assist banks with higher put together and scale back public stress on saying too excessive revenue development within the context of shoppers/companies going through difficulties,” Yuanta’s report mentioned.
Most banks elevated provisioning in Q2/2021, however not all banks have a excessive NPL protection ratio, Though banks consider that NPL protection ratio ought to rely on worth of the collateral, however the crew thinks that sure sorts of collateral (reminiscent of automobile loans and different client finance loans) have fluctuations in market worth. market and can even take a very long time to liquidate within the context of an advanced pandemic.
The evaluation crew mentioned that the income of banks in 2021 and 2022 partly rely on the power to recuperate money owed from restructuring loans. If these loans develop into unhealthy money owed, banks – particularly these with low LLR ratios – must improve their provisions, thereby decreasing their income.
Yuanta famous that there’s a vital disparity between the numbers on the money circulate statements and earnings statements of some banks. The distinction is unfavourable when gross curiosity earnings (ignoring curiosity expense on this case) has been acknowledged on the earnings assertion however has not truly been collected.
The rationale for the distinction could also be because of the time of recognition and the distinction between the accrual and the precise income ideas. Nevertheless, this unfold can even sign that earnings are prone to be adjusted downwards sooner or later, as this is a sign that delinquency is prone to improve.
As well as, one other problem price noting is that some banks have a comparatively excessive ratio of accrued curiosity to whole belongings, which can trigger income to not be precisely mirrored. It additionally will increase the potential threat if banks don’t accumulate these accrued pursuits, which signifies that banks will probably be pressured to jot down down income if the unearned revenue happens in the identical accounting interval. accounting, or must report a rise in bills if it happens in one other accounting interval. In all circumstances, unearned accrued curiosity can scale back income.
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