Banks make a lot of money from investment securities

28-Jan-2021 Intellasia | Dau tu Online | 6:02 AM Print This Post

Securities trading, especially investment securities at many banks increased strongly in the context that the stock market has been continuously increasing recently. In the fourth quarter of 2020, Sacombank’s net interest income increased 70 percent over the same period in 2019, reaching 3.013 trillion dong. This bank also gained sudden profit from trading investment securities, up to 515 percent over the same period, reaching 120 billion dong (accumulated for the whole of 2020, profit from trading investment securities increased by 25%, reached 91 billion dong). These are the two main drivers to help Sacombank’s operating income in the fourth quarter of 2020 increase by 33%, reaching 5.016 billion dong.

In the fourth quarter of 2020, most of the business activities of VietBank were not very satisfactory. In which, main activity dropped 72 percent YoY, only nearly 86 billion dong of net interest income. Net profit from services decreased by 11 percent to more than 23 billion dong. Net profit from other activities decreased by 14%. Investment securities trading is the only bright spot in this quarter when the interest rate increased by 43 percent (252 billion dong).

Nguyen Dinh Tung, general director of OCB, said that the bank’s profit partly comes from interest rate fluctuations in the capital market, very good liquidity, and the other part is from bond trading. OCB earns more than 2 trillion dong from this source, mainly government bonds. For the whole year 2020, OCB reached 4.414 billion dong of profit before tax.

The reason banks make a lot of money from investment securities in the last quarter of 2020 is due to the recent strong rise in the stock market, attracting a large amount of money flowing into the market.

LienVietPostBank’s business activities in the fourth quarter of 2020 showed better results than the same period in 2019. Specifically, the main activity brought in 2.003 trillion dong in net interest income, up 28%. Non-interest activities were boosted as interest from services increased by 39%. In which, profit from trading securities was nearly 34 billion dong (not recorded in the same period), profit from other activities was 6.8 times higher than the same period.

Although the cost of provisioning for credit risks was three times higher than the same period, LienVietPostBank still reported a 70 percent and 61 percent increase in pre and after tax profit in the fourth quarter of 2020, reaching more than 685 billion dong and over 466 billion dong. For the whole year, although provision expenses increased 61 percent year-on-year, the bank still recorded a 19 percent and 16 percent increase in pre and after tax profit, reaching nearly 2.427 billion dong and 1.862 billion dong.

With VIB, business performance in the fourth quarter of 2020 is quite effective. The main source of income brought in 2.561 billion dong in net interest income, up 53 percent over the same period. Non-interest activities were promoted, revenue from services increased 44 percent (751 billion dong), profit from foreign exchange activities was nearly 28 billion dong, interest from other activities increased by 50 percent (77 billion dong). Net profit from trading investment securities was 47.39 billion dong, while the same period last year was 37.67 billion dong. For the whole year 2020, VIB’s pre and after-tax profits increased 42 percent from the previous year, recording nearly 5.801 billion dong and nearly 4.641 billion dong.

According to Dr Nguyen Tri Hieu, a finance banking expert, in income from investment securities, has income from the resale of bonds before maturity. This is a noteworthy issue because the refinancing risk has been revealed quite clearly. Banks tend to hold bonds of real estate businesses, while this is a group of bonds that are being warned a lot because of the unavoidable risks. Therefore, it will be difficult to predict the consequences if banks continue to put capital into this product.

 

Category: Finance, Vietnam

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