Pre-tax profit of HCM City based banks declines in first 7 months

The pre-tax profit of HCM City-based banks in the first seven months of this year reached only 5.7 trillion dong, equalling to 33 percent of the whole 2011′s figure, the State Bank of Vietnam (SBV)’s HCM City branch reported.

The decline in profit of banks is likely to increase in coming months when the reduction of the lending interest rate to 15 percent per year for old loans finishes.

The central bank said that as of August 3, 2012, more than 70 percent of old loans have been adjusted down the interest rate and it is expected that by the end of August, all banks will complete this interest rate cut.

According to a HCM City-based large commercial joint stock bank, the interest rate cuts for old loans will reduce their profit by 900 billion dong.

Another bank in top five also forecast that its profit will drop 600 billion dong due to interest rate cut. With state-owned banks or joint stock banks with the dominant stake held by the state, their profit from the interest rate reduction will be affected strongly with an estimated profit decline of 1-1.5 trillion dong/bank.

So far, except Saigon Thuong Tin Commercial Joint Stock Bank (Sacombank-STB), no banks have achieved 50 percent of the year’s profit target.

“With our efforts, we can reach only about 70 percent of this year’s profit target” – a bank’s CEO said, adding that at many banks, credit growth is still at zero percent although they offered the lending interest rate at 12-13%/year.”

“Yearly, by this time, producers often borrowed capital to purchase raw material and reserve input for production cycle in the fourth quarter, therefore credit grew highly. However, this year producers do not need capital to buy raw materials because of high inventory and they do not have more production plan as well”, he stressed.

 

Category: Finance