Banks gain great profits thanks to forex trading

28-Oct-2020 Intellasia | VnEconomy | 6:02 AM Print This Post

The difference between the buying and selling prices of the US dollar, together with the wide-ranged and fluctuating gold price, and the State Bank of Vietnam (SBV)’s buying in foreign currencies, had helped most banks to record big profits from forex trading in 9 months of 2020.

A series of significant profit from forex trading in the statistics of the first 17 banks, excluding big banks like Vietnam Bank for Agriculture and Rural Development (Agribank), Joint Stock Commercial Bank for Investment and Development of Vietnam (BIDV), Vietnam Joint Stock Commercial Bank for Industry and Trade (Vietinbank), Vietnam Technological and Commercial Joint-Stock Bank (Techcombank), Vietnam Export Import Commercial Joint Stock Bank (Eximbank), was announced in the first nine months of 2020. This showed that 14 organisations had reported big profits from forex trading. This was a high growth compared to the same period in 2019, with the growth rate was even counted by times.

Joint Stock Commercial Bank for Foreign Trade of Vietnam (code: VCB, Vietcombank) continued to be a strong bank in the forex trading sector when recording 2.963 trillion dong in net profit in the first nine months of 2020. The profit in Q3 only contributed 1.034 trillion dong, with a growth of 16.9 percent and 14 percent respectively over the same period last year.

Saigon Thuong Tin Commercial Joint Stock Bank (code: STB, Sacombank) and Military Commercial Joint Stock Bank (code: MBB, MB) had their net profits from foreign exchange trading in Q3/2020 decreased slightly. However, generally, in nine months, Sacombank and MB recorded net profit growth from foreign exchange trading activities at 32 percent and 9.8%, respectively, with a value of 558 billion dong and 518 billion dong.

Among the top banks with great profit from forex trading were Asia Commercial Bank (code: ACB), An Binh Commercial Joint Stock Bank (ABBANK) and Vietnam Maritime Commercial Joint Stock Bank (MSB) with net income recognition for nine months was 488.5 billion dong; 342.3 billion dong and 227.3 billion dong. In which, ABBANK recorded a sudden increase in net profit in Q3 and the first nine months, at 51 percent and 147 percent respectively over the same period in 2019.

Besides, among the banks that recorded net profits from major forex trading, Sai Gon Joint Stock Commercial Bank (SCB) had nine months’ net profit from securities trading and foreign exchange trading reached over 462 billion dong.

In terms of growth, five banks with net profit growth from forex trading in the first nine months of 2020 calculated by times included Tien Phong Commercial Joint Stock Bank (TPBank) (+4.7 times), Saigon Bank for Industry and Trade (Saigonbank) (+2.75 times), Southeast Asia Commercial Joint Stock Bank (SeABank) (+2, 27 times), ABBANK (+1.47 times), MSB (+1.33 times).

Only three banks recorded a loss in forex trading activities in nine months including Vietnam Prosperity Joint-Stock Commercial Bank (VPBank) (-220 billion dong), Vietnam International Commercial Joint Stock Bank (VIB) (-6.8 billion dong) and Bac A Commercial Joint Stock Bank (Bac A Bank) (-6.2 billion dong). However, VIB and BacA Bank saw a sharp increase in profits in Q3/2020, recording a profit of 21 billion dong (-28.6 billion dong year-on-year loss) and 7.4 billion dong (4.2 billion of year-on-year loss).

Three advantage

Incomes from forex trading activities of credit institutions included revenues from spot foreign currency trading, gold trading and derivative monetary instruments. Particularly, gold trading revenue only appeared in organisations licensed to trade gold bars, such as Sacombank, ACB, SCB, MB, and VPBank.

Notes of the Q3 and six-month financial statements reviewed in 2020 showed that gold trading and spot foreign currency trading had made significant contributions to the sudden growth in the first nine months of 2020 for foreign exchange of institutions.

Very little could be found in organisations that benefited from currency derivative trading. For example, VPBank, although the two gold trading activity and spot foreign exchange trading activity were profitable, losses in the trading of monetary derivative financial instruments resulted in a net loss from foreign exchange trading activities at 220 billion dong.

Analysts said that the difference in the US dollar trading prices in the first nine months of 2020 was more expansive than the same period last year, helping banks to achieve higher profit margins in each transaction. Also, the trading volume in the period increased compared to the first nine months of 2018.

Specifically, in the first nine months of this year, the difference between the US dollar buying and selling prices at banks was quite vast at 160 dong to 220 dong per US dollar, much higher than the same period in 2019 at only 100 dong to 120 dong. Moreover, the difference between the buying price in the US dollar of banks and the US dollar’s selling price by the banks to SBV (the exchange rate of the SBV’s Exchange ) was about 25 dong to 85 dong per US dollar.

In the first nine months of the year, SBV bought about $12 billion to $13 billion to increase foreign exchange reserves to $92 billion. Foreign currency purchased by SBV in the first nine months of 2020 was estimated to be equal to that of the whole year 2019.

Besides, the foreign currency SWAP operation in the context of a stable VND/USD exchange rate, the US dollar deposit interest rate of zero percent also contributed to banks’ profitability.

Another critical factor was that, in the first nine months of 2020, the gold price had continuously fluctuated often and increased sharply over the same period in 2019. This had brought gold opportunities to increase profits for banks licensed to trade gold bars. The more exciting the gold market, the more volatile the gold price was, the more profitable gold trading organisations were.


Category: Finance, Vietnam

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