Banks earn huge profits thanks to credit and foreign exchange trading

29-Dec-2016 Intellasia | Giao Thong | 6:00 AM Print This Post

In spite of not escaping from the credit segment, some banks have succeeded with different sources of profit in the 9-month profit picture thanks to stock trading, debt trading and forex trading.

In the last days of December, commercial banks continue listing US dollar price at 22,800 dong/US dollar – the highest level since the beginning of this year. Not until this point does exchange rate fluctuate strongly but it has been exciting since the beginning of the year.

Based on the published exchange rate between US dollar and dong at Vietcombank, only in Q3, exchange rate fluctuation (the difference between the highest and the lowest levels) was 0.6 percent. Since the beginning of the year till the end of Q3, the volatility was 0.9 percent.

This development helped many banks record huge profit thanks to foreign exchange trading. For example, Vietinbank’s profits from foreign exchange trading in Q3 reached 130.9 billion dong, 330.8 percent higher than the same period of 2015. Cumulatively, during January-September, this bank’s profit from foreign exchange trading surged 397.6 percent to 474.7 billion dong.

BIDV’s foreign exchange business also reversed when recording large profit of 374.3 billion dong in the first nine months of 2016. The contribution in Q3 only was 186.8 billion dong compared to the loss in the same period of 2015.

Another “exemplary” is Techcombank. The spurt in profits has brought this bank on top of the group of joint stock commercial banks. In the first nine months of the year, Techcombank earned over 2.290 trillion dong profits, up 89.5 percent year-on-year. Contributing to this growth was the contribution of foreign exchange business segment with the profit of 161.5 billion dong (compared to the year-on-year loss of nearly 80 billion dong).

With exchange rate fluctuations in Q4/2016 amounting to two percent, surely the profit picture of banks at the end of the year will be more surprising.

Of the six banks having excess profits over the past nine months, VPBank was the only bank that suffered from losses in forex trading but its investment securities trading was profitable. In January-September, profits from this business segment rose sharply by 47.6 percent to 146.4 billion dong, contributing to the overall profit of over 2.621 trillion dong. Just being a bank with mid-range scale, the bank’s profit growth of 38 percent has brought the bank’s performance effectiveness to a new threshold.

However, credit segment contributed largely to VPBank’s profit when the financial statement in the first nine months recorded the net interest income in the first nine months to rise as much as 45 percent to over 1.095 trillion dong. In its Q3′s financial statement, “income from loans to customers” and “other revenues from credit operations” had very high growth rates, 41.7 percent and 101.5 percent respectively. These two segments have contributed 83.7 percent to the net interest income.

Not only VPBank, Techcombank has also boosted credit in the past year. As a result, profit from credit operations (up 30.4 percent) along with other revenues from credit activities (up 1.86 percent) pushed Techcombank’s net profit to over 2.290 trillion dong (up to 89.5 percent) compared to last September.

Profit from credit operations of banks still account 80-90 percent including major banks. For example, Vietinbank whose profit topped the system, the interest income from customer lending, financial leasing and other income from credit operations still account for a large proportion and record high growth rate (30.5 percent, 19.2 percent and 79.2 percent).

Though the State Bank has actively controlled credit quality, warned about credit being poured into real estate and does not agree for many banks to loosen credit criteria in 2016, obviously in the current context, credit remains the key pillar, even “bearing” loss-making non-credit business segments.

For example, LienVietPostBank suddenly made 699.4 billion dong profit, up 128.7 percent year-on-year thanks to the growth in customer loans to reach 72 trillion dong (up 28 percent) while other business activities declined such as the losses of the service-segment with 212 billion dong, investment securities with 230 billion dong, and other activities with 136 billion dong.


Category: Finance, Vietnam

Print This Post

Comments are closed.