Vietnamese banks in a bright spot in the post-pandemic world

Jun 17th at 09:01
17-06-2020 09:01:11+07:00

Vietnamese banks in a bright spot in the post-pandemic world

Vietnamese banks offer attractive investment opportunities because of the sector's fast growth prior to COVID-19 and the country's relatively unscathed emerging from the pandemic, which, combined with the young and highly-productive labour force promises a glorious time ahead.

Vietnamese banks in a bright spot in the post-pandemic world
Vietnamese banks are under the spotlight in the post-pandemic world

The Asian Development Bank (ADB) has forecast Vietnam to be one of the fastest-growing economies in Southeast Asia despite the impact of COVID-19. In its Asian Development Outlook report 2020, it reiterated the country’s economy will bounce back to 6.8 per cent in 2021.

Given the rapid digitalisation trends observed in recent years and the government's policies towards financial inclusivity – combined with the State Bank of Vietnam's policies of strengthening banks’ balance sheets – the current situation provides a unique mix where Vietnamese banks can keep growing rapidly and increase profitability by introducing innovative financial products to reach out to traditionally cash-based sectors of the economy.

The pandemic has accelerated the cashless transformation in Vietnam, and banks have slashed online transaction fees to encourage this payment method, thereby boosting e-commerce and delivery services.

To support post-COVID-19 economic recovery, the government has launched a $10.8 billion credit support package, lowered interest rates, and delayed the payment of taxes and land use fees for several business lines. It has further issued financial assistance for employers and employees affected by the pandemic.

Therefore, these fundamentals provide the banks with a strong position to be able to grow their assets without the need to lower underwriting standards and increase loan portfolio risks.

That could also mean that Vietnamese banks, in theory, are well placed to deliver above-market returns on investor capital.

As a result, without putting in a lot of money, investors are potentially able to see their balance sheets grow for a sustainable period of time.

Moreover, the fact that the Vietnamese economy features a low-cost labour force and high productivity levels may provide a future-proof basis for investors' returns. Also, the growing productivity in local export-oriented sectors is likely to attract foreign direct investments and could ensure current account surplus and domestic liquidity in the country.

Therefore, Vietnam is best placed to be the benefactor of the unravelling US-China trade tensions, which are already resulting in a shift in the global supply chains.

While the global pandemic is far from over, the Vietnamese government has made sure that the country is well prepared in case of a third wave.

Vietnam currently produces seven million fabric masks and 5.7 million surgical masks a day, while Vingroup has stated that it can produce 55,000 ventilators a month. Should there be another wave of infections, the country has also readied new hospitals equipped with the required medical equipment.

The World Bank has further stated that Vietnam’s economy remains resilient and in its report titled East Asia and Pacific in the Time of COVID-19 reiterated that the country benefits from the numerous free trade agreements with its favourable labour market conditions.

With growing financial capabilities and a high GDP growth rate, the Vietnamese banking sector may be a bright spot in the post-COVID-19 investment landscape.

VIR





NEWS SAME CATEGORY

Deputies debate tax exemption for SMEs

A policy that may grant up to 30 per cent tax exemption for small-to-medium-sized business (SMEs) to mitigate the adverse effects of COVID-19 was discussed on...

Nam A Bank to issue shares to increase charter capital

Nam A Commercial Joint Stock Bank will issue nearly 111 million shares to raise its charter capital from VND3.89 trillion to VND5 trillion (US$214.6 million).

Business support from BAC A BANK

Locally-invested BAC A BANK is now strongly extending its financial support for businesses which are hurt by the health crisis. With a view to supporting...

SHB to raise capital to US$832 million

Sai Gon-Ha Noi Joint Stock Commercial Bank (SHB) plans to increase charter capital to VND19.3 trillion (US$832 million) in 2020.

Credit institutions must speed up restructuring to meet deadline

Some credit institutions (CIs) that have not yet completed their restructuring roadmap will have to speed up the process to meet the State Bank of Viet Nam (SBV)’s...

Pandemic-hit female workers get financial support

More than 800 female house cleaners, who are working at JupViec.vn, a tech company connecting household service workers and customers via phone app in Hanoi and Ho...

Vietnam leading the regional pack in embracing a cashless society

The Vietnamese government is looking to take the country towards relying less on cash when making purchases. Dang Tuyet Dung, Visa country manager for Vietnam and...

Govt to keep pushing for cashless payment

Non-cash payments have increased sharply in recent time in Viet Nam, but more efforts are needed to increase their rate, experts said.

Vietnam state budget revenue fall 9% in Jan-May on Covid-19

So far, total amount of deferrals of tax payment and land rental fees under the government’s support programs stood at VND37 trillion (US$1.58 billion) as of May.

Tax exemptions encouraging agricultural growth

The National Assembly is expected to provide millions of farming households and thousands of agricultural firms nationwide with an exemption of tax for using...

Bank stocks

Insurance stocks


MOST READ


Back To Top