Banks earn large profits from securities investment

26-May-2018 Intellasia | DTCK | 6:00 AM Print This Post

Viet Dragon Securities Company (VDSC) has just released the overall picture in Q1/2018 about business results of banks on stock exchanges. Accordingly, the total operating income and pre-tax profits of 14 listed banks were 56.340 trillion dong and 20.126 trillion dong respectively, up 35 percent and 52 percent from the same period of 2017.

The major source of income in the income structure of banks still came from interest. However, the growth and contribution ratio in the structure has divided among bank groups. The non-interest income in the group of small banks such as KLB, EIB, and LPB slightly decreased. In the group of big banks such as CTG, VCB, BID, the strong growth was recorded in BID with more than 34 percent.

Meanwhile, ACB, MBB, STB or VCB had income structure to be less dependent on interest income, with less than 80 percent. This will help these banks’ income to be less affected than other banks once the lending activity of the economy faces difficulties. Along with that, the credit growth of banks is currently limited by the room granted by the State Bank. This is also the limitation when banks want to expand interest income.

Service activity recorded positive trend, especially in leading banks such as ACB, BID, STB, and VCB. According to VDSC’s analysis, this result is attributable to two factors including the expansion of service segment and service fee increase. In fact, many banks are still applying the fee equal to about 30-50 percent of the ceiling allowed by the State Bank. Many small banks even exempted transaction fee. Therefore, according to VDSC’s remark, the room for banks to increase service fee is assessed to be quite large.

However, through post-audited financial statements in Q1/2018 of banks, there was a noticeable factor in the business results of the banking sector, i.e. the growth of revenues from securities trading, capital contribution, share purchase were very high. This resulted from low bond yields and rising stock markets in Q1/2018.

At Techcombank, the proportion of net income/total operating income was just 54.6 percent while profit from non-credit activities accounted for as much as 45.4 percent of the total income.

Ending the first three months, Techcombank’s credit grew at rather modest level of 1.93 percent (lower than the average growth of the entire system at 3.5 percent). Accordingly, this segment brought the bank the net interest of 2.546 trillion dong, up 16.6 percent from the same period last year.

Meanwhile, Techcombank witnessed the strong growth of other segments. Specifically, investment securities trading recorded the net profit to increase 4.7 times, to 441 billion dong. The revenue from capital contribution and share purchase also reported the profit of 894 billion dong, 2.5 times higher than Q1/2017, reckoning for 9.5 percent and 19.2 percent of the total profit.

ACB’s investment securities trading in Q1/2018 also had profit to triple from the same period, reaching 138 billion dong. Do Minh Toan, CEO of ACB said over the last five years, ACB focused on handling the backlogs so the resources are not enough to welcome investment opportunities? Therefore, since 2018, ACB will focus more on seeking and welcoming investment opportunities. Besides, ACB will strengthen non-interest income, service income, while cutting and managing costs well.

VPBank’s profits from trading securities and investment securities also improved remarkably in the first quarter of this year, reaching 30 billion dong and 177 billion dong respectively, up 7.5 times and 2.4 times from the same period of 2017.

Vietinbank’s total non-credit income in the first quarter of this year was more than 1.601 trillion dong, up three percent from the beginning of this year. Of which, the profit from service activity increased 15.6 percent, reaching 592 billion dong; the profit from trading securities doubled, touching 239 billion dong; the profit from investment securities was 79 billion dong compared to the loss of 17 billion dong in the same period. Foreign currency trading earned lower profit compared to the same period, down 12.7 percent to 234 billion dong. The revenue from Vietinbank’s capital contribution and share purchase hit 99 billion dong, up more than 3.5 times.

As a result, the net profit from Vietinbank’s pre-provisioning business activity was 5.379 trillion dong. After deducting 2.351 trillion dong risk provisioning costs, the pre-tax profit was 3.027 trillion dong, up 19 percent year-on-year, completing 28 percent of the whole year profit target.

However, according to securities analysts, with the interest rate re-increasing trend in Q2/2018 and the deep fall of the stock market, this revenue from securities investment is difficult to maintain good growth momentum in the remaining quarters of 2018 for banks. That is not to mention, banks are at risk of making losses due to unusual ups and downs of the stock market over the last period.


Category: Finance, Vietnam

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