20 banks have large FX trading profit in the first three quarters

01-Nov-2018 Intellasia | Tri Thuc Tre | 6:26 AM Print This Post

In the first nine months of 2018, 20 banks have announced financial statements with large net foreign exchange (FX) gains of 4.293 trillion dong, up 32 percent year over year (y-o-y). For the third quarter alone, these 20 banks generated a profit of 1.290 trillion from FX trading.

Of which, 16 out of 20 banks had positive growth in FX trading in the first nine months, many banks had high growth rates of over 100%. For example, Vietnam Prosperity Joint Stock Commercial Bank (VPBank) posted a loss of 43 billion dong in the same period last year, but earned a profit of 251 billion dong in the first three quarters of this year; Viet Capital Joint Stock Commercial Bank (Viet Capital Bank) had a profit of 115 billion dong (up nearly 3 times) which was the main driving force for the bank’s profit growth. Joint Stock Commercial Bank for Investment and Development of Vietnam (BIDV), one of the largest banks in the foreign exchange market, posted an FX gain growth of 55 percent to 797 billion dong.

Beside the group of banks with high growth, Joint Stock Commercial Bank for Foreign Trade of Vietnam (Vietcombank), Saigon Thuong Tin Joint Stock Commercial Bank (Sacombank), Bac A Joint Stock Commercial Bank (Bac A Bank) and LienViet Post Joint Stock Commercial Bank (Lienviet Post Bank) had a decrease compared with the same period last year, only LienVietPostBank suffered a loss of nearly seven billion dong.

Despite the decrease of six percent y-o-y, Vietcombank still had profit from FX trading of over 1.6 trillion dong, much more than the other banks. For years, Vietcombank has often been referred to as a “market maker” in foreign exchange trading with a distinct market share.

The other banks with large market shares are BIDV, VietinBank, Sacombank, Vietnam Technological and Commercial Joint Stock Bank (Techcombank), Asia Joint Stock Commercial Bank (ACB), Military Joint Stock Commercial Bank (MBB), Vietnam Joint Stock Export Import Bank (Eximbank) and Vietnam Prosperity Joint Stock Commercial Bank (VPBank), also expecting to join the competition.

At VPBank, foreign exchange business which is not the strength of this bank for many years before often suffered heavy losses: 2017 with loss of 159 billion dong, 2016 with loss of 319 billion dong, and 2015 with loss of 290 billion dong. However, VPBank is changing dramatically in 2018 when it gained a profit 251 billion dong in FX trading in the first nine months of this year. FX trading has become one of the key drivers of bank earnings growth as credit growth slows down, service and stock markets decline.

In addition to Vietcombank, about 5-6 following banks have quite similar market share: Sacombank with 313 billion dong, ACB with 308 billion dong, MBB with 302 billion dong, VPBank with 251 billion dong, and Techcombank with 247 billion dong. These banks even have to compete with foreign banks that have the advantage of abundant foreign currency sources.

Not yet disclosing its nine month result, but for the first half of the year, HSBC Vietnam has made a profit of 347 billion dong, just after Vietcombank, BIDV and nearly close to VietinBank.

In fact, trading FX is a risky activity with quite erratic up and down movements, even with large banks. However, banks will not ignore this lucrative business segment as the demand for foreign currencies for tourism, overseas study, resettlement, etc. in foreign countries is increasing. The amount of overseas remittances to Vietnam also increased rapidly year by year.

Banks also have to compete against the “free market”. Although the banks have offered many promotions to customers doing foreign currency transactions with banks, the habit of buying and selling foreign currencies on the free market of people is still difficult to change.

The case of a person exchanging a $100 note at a gold store being fined 90 million dong recently caused a lot of buzz in public opinion is the most obvious example. The majority of people are surprised because they themselves in daily life never go to the bank to buy foreign currencies but choose the gold stores for time saving and more convenient procedures.

 


Category: Finance, Vietnam

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