Bank Profits Beat Target

“An Binh Commercial Joint Stock Bank had a positive 2009 as it fittingly completed its annual profit target of VND415.57 billion. Other financial indicators signalled steady growths: The charter capital reached VND3,482 billion, total assets valued at VND26,576 billion and operating network was expanded to 29 provinces and cities with 86 branches and transaction offices,” said Mr Nguyen Hung Manh , General Director of ABBank. ABBank is one of many banks to survive the crisis and obtain good business results in 2009 even, so far, many banks have not announced official figures.

Asia Commercial Bank (ACB), one of the largest joint stock commercial banks in Vietnam, announced its consolidated profit before tax (inclusive of the bank and its subsidiaries) of VND2,818 billion in 2009. In short, the target exceeded the annual plan by VND118 billion and increased by more than 10 % from 2008.

 

The Vietnam Technological and Commercial Joint Stock Bank (Techcombank) also posted a profit of more than VND2,250 billion, up 40 % compared with 2008. Saigon Thuong Tin Commercial Joint Stock Bank (Sacombank) said its profit rose 75 % to VND1,901 billion, exclusive of earnings in its subsidiaries.

 

In the group of State-owned commercial banks, Vietnam Joint Stock Commercial Bank for Industry and Trade (Vietinbank) earned more than VND3,000 billion of profit in 2009.

 

Among the small banks, Petrolimex Group Commercial Joint Stock Bank (PG Bank) reported its profit to grow 250 % to VND230 billion. Saigon Hanoi Commercial Joint Stock Bank (SHB) also bagged VND415.3 billion, up more than 44 % compared with 2008.

 

Although many banks have not published their official business results in 2009, they reportedly completed their plans because several of them reported their profits already ahead of the annual plans. In the first 11 months of 2009, Joint Stock Commercial Bank for Foreign Trade of Vietnam (Vietcombank) made a profit of VND4,400 billion, Sacombank VND1,658 billion, Maritime Bank VND880 billion, LienVietBank VND542 billion and Ocean Bank VND280 billion. Before that, VIB announced to complete their annual earnings plans in late September 2009.

Although earnings in 2009 were positive, many difficulties will emerge for banks in 2010, according to economic experts. At a seminar on Vietnamese banks overcoming the crisis and moving forward” recently held by the Vietnam Chamber of Commerce and Industry (VCCI), Dr. Le Xuan Nghia, Vice President of the National Financial Supervision Council, forecast that the opportunities and challenges for Vietnamese banks are huge in 2010. “Strains of foreign currency liquidity will reduce but still remain as lending interest rate subsidy for medium and long-term loans and for agricultural development will continue in 2010. The prime rate in 2010 may be not be subjected to a ceiling rate. Accordingly, lending and deposit interest rates will be established on the basis of agreement between two parties,” he predicted. Thus, according to Mr Nghia, banks need to have a strong research and forecasting staff to catch up new market opportunities in the context of crisis.

 

Dr Le Tham Duong said, to cope with crisis, banks need to place risk management on top, maintain good reserve liquidity, not overrate profits, expand cooperation with other banks and other financial institutions. According to Mr Duong, in 2010, domestic and foreign economic situations remain quite complex and the banking system will have to confront many challenges. Currently, many banks only look at short-term benefits and competitions on the condition that they make more profit. So far, only four out of 38 joint stock banks meet risk management requirements. The chartered capital of many banks only stay at VND3,000 billion while share issue plans are not reasonable, leading to pressures on dividend payment.

 

“Solutions to capital mobilisation are primarily based on the hike in interest rate, leading to high input cost amid narrowing output. The lending evaluation is mainly based on loan collateral, not the solvency of borrowers. Thus, in the context of changing economic and monetary policies, banks will face more risks, "Mr Duong said.