Challenges await banks this year

22-Jan-2015 Intellasia | TBKTSG | 6:00 AM Print This Post

Bankers said 2015 will remain a challenging year though some banks have reported higher earnings and there have been more positive signs in the local economy.

Vietcombank, one of the banks with shares attractive to investors recently, posted last year’s pre-tax profit of VND5.68 trillion, up 2 percent over the previous year. Military Bank earned VND3 trillion in after-tax profit last year, almost unchanged from the previous year.

Meanwhile, Sacombank estimated its profit to be slightly higher than the target of VND3 trillion while the figure of 2013 was VND2.96 trillion.

However, the chair of a commercial bank whose pre-tax profit was estimated at around VND3.2 trillion last year, warned of many challenges for the banking sector this year.

He said despite the recovery of the local economy, steel, seafood and other sectors are still coping with difficulties, so banks should not expect their profits to grow strongly this year.

According to the chief executive officer of HSBC Vietnam, Pham Hong Hai, the banking system bears the brunt of the woes faced by the economy, with settlement of bad debt and restructuring of the banking system remaining to be solved.

Hai also said the health of the banking system would continue to be poor if consumption does not improve significantly.

An official at the central bank described 2015 as a turning point for the banking sector and if woes are resolved this year, a recovery may come next year. One of the two main tasks of this year is to merge ailing banks to reduce the number of banks on the market. Such a solution will obviously cause some difficulty for larger banks, especially their profits, but this is the best way to address the existing problems of the sector.

The second task is to improve the financial situation of the system, including drastic implementation of Circular 36, to prevent the system from crashing.

Strong actions will be taken this year, including the possibility of the central bank taking over small banks for restructuring and letting weak banks file for bankruptcy.

Such solutions will make the banking system healthier in the long run though impact would be enormous.

The central bank’s official projected many banks would see profits slipping this year, as they have to set aside higher provisions as required by the central bank.


Category: Finance, Vietnam

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