Though commercial banks keep complaining that it’s very difficult to find good clients to lend o, they still made fat profits so far this year.
The reports about the slow credit growth rate of the banking system have made people think that commercial banks are meeting big difficulties, because credit brings 80 percent of their profits. However, in fact, banks have had a very satisfactory business performance so far this year.
According to the State Bank of Vietnam, by the end of August, the credit growth rate of the whole banking system had reached 1.4 percent over the end of 2011, much lower than the targeted 15-17 percent set up by the State Bank. However, most of the banks have reported satisfactory profits, while some of them got the profit of trillions of dong in the first eight months of the year.
Eximbank, for example, has announced the pre-tax profit of 2300 billion dong, though the bank had the credit growth rate of minus 2.3 percent by the end of August.
Explaining this, Truong Van Phuoc, general director of Eximbank, said the minus credit growth rate or low growth rate does not mean that banks get no profit. In credit operation, the profit is the margin between the input capital costs and the lending interest rates. If banks can manage their loans well and minimise the bad debts, they would still be able to make big profits.
Phuoc went on to say that the minus credit growth rate reported for the first eight months of the year does not mean that banks stopped lending. In reality, banks still keep disbursing, while only the outstanding loans have not increased in comparison with the previous year.
As such, lending remains an important source of income of commercial banks. As for Eximbank, in the second quarter of 2012, it took a loss of 46 billion dong in foreign currency trading, while the profits from banking services dropped by 26 percent over the same period of the last year, bringing 65 billion dong. Meanwhile, credit activities still could bring the profit of 1418 billion dong, up by 12.5 percent over the last year’s same period.
The Asia Commercial Bank ACB has also reported the low credit growth rate of 0.9 percent in the first six months of the year and the slow disbursement in the last two months, but has also reported the high profit of 2345 billion dong.
Both ACB and Eximbank set up relatively high targeted profits for 2012. Eximbank, for example, strives to obtain the pre-tax profit of 4600 billion dong, while ACB 5500 billion dong.
While a lot of businesses have lowered their business targets amid the current difficulties, the two banks still strive for the initially set up targets.
CEO of Sacombank Phan Huy Khang also said the bank got the minus 0.3 percent credit growth rate in the first half of the year, while it has used 3-4 percent of the “17 percent credit quota” granted by the State Bank. However, Sacombank still could fulfill the business plan for the first half of the year with 50 percent of the yearly targeted profit (3400 billion dong) obtained.
An executive of Sacombank has affirmed that the targeted profit proves to be within reach, despite the current economic difficulties, which have led to the weaker capital demand, and despite the decreasing interest rates.
Smaller banks have said they may have to lower the business targets, anticipating the big difficulties in pushing up lending. However, the banks still got satisfactory business performance in the first half of the year.
Dong A Bank, for example, earned 750 billion dong in pre-tax profit in the first half, while OCB fulfilled 50 percent of the plan to make 500 billion dong in profit after the first seven months.