How do banks set their 2021 profit goals?

27-Jan-2021 Intellasia | NDH | 7:22 AM Print This Post

After getting better results in 2020 than expected, many banks continue to set growth targets in 2021. Typically, Commercial Joint Stock Bank for Foreign Trade of Vietnam (Vietcombank) aims at a pre-tax profit goal of 25.2 trillion dong, up by 12 percent over the previous year; total asset growth of six percent; mobilisation growth from market 1 of eight percent, and credit growth of 12%. The bank expects to control bad debt ratio below one percent. In 2020, Vietcombank attained a separate pre-tax profit of 22.529 trillion dong and consolidated profit of 23.068 trillion dong, equivalent to 2019.

In 2021, Commercial Joint Stock Bank for Industry and Trade of Vietnam (VietinBank) targets to expand total assets by three to six percent, credit by eight to 11 percent and capital mobilisation by 10 12%. The bad debt ratio is expected to be controlled below two percent. VietinBank’s separate and consolidated pre-tax profit growth is targeted at 10 20%. In 2021, the bank attained a pre-tax profit of 16.450 trillion dong, up by 43%.

Commercial Joint Stock Bank for Investment and Development of Vietnam (BIDV) has not released its profit result in 2020. It only expects to expand total assets by nine percent; outstanding loans by 12%, according to the limit assigned by the State Bank of Vietnam (SBV); capital mobilisation by 12 14.8%, and control bad debt ratio below 1.6%. BIDV plans to hold the 2021 annual shareholders meeting on February 27th. In 2020, the bank’s separate and consolidated pre-tax profit were respectively 8.515 trillion and 9.017 trillion dong, exceeding the financial plan assigned by the SBV, down by respectively 18 percent and 16 percent compared to 2019.

In the group of private joint stock banks, some newly listed banks or banks about to list shares on the stock markets have announced their business plans. Maritime Commercial Joint Stock Bank (MSB) aims to increase pre-tax profit by 30%, and keeps all other targets such as total assets, credit and customer deposits unchanged. In 2020, the bank’s pre-tax profit was 2.5 trillion dong, up by 94 percent compared to 2019, 74 percent higher than the year target.

For Southeast Asia Commercial Joint Stock Bank (SeABank), the after-tax profit is set at 1.639 trillion dong, up by 36 percent compared to the plan in 2020, according to the prospectus at the time of listing. Meanwhile, in 2020, the bank attained a pre-tax profit of nearly 1.729 trillion dong, up by 24 percent over 2019, 15 percent higher than the set plan. The bank also recorded total assets of180.207 trillion dong, up by 14.5 percent compared to the beginning of the year; total outstanding credit in market 1 of 108.869 trillion dong, up by 10.5%; and total mobilisation in market 1 of 113.276 trillion dong, up by 18%.

Orient Commercial Joint Stock Bank (OCB) the bank which is about to list its shares on the stock market aims at a pre-tax profit of 5.060 trillion dong in 2021, 15 percent higher than the 2020 target. The total assets and lending to market 1 is expected to increase by 19%. Similarly, the bank has published its pre-tax profit in 2020 with very positive result of 4.414 trillion dong, up by 37 percent compared to 2019, exceeding the year target. OCB’s total assets were 152.848 trillion dong, up by 29 percent over the beginning of the year, while the total mobilisation and outstanding credit were respectively108.614 trillion dong and 90.128 trillion dong, up by 27 percent and 24%, respectively.

The Research centre of Saigon Securities Incorporation (SSI Research) said that the Decree 121 has created a legal framework to support state-owned commercial banks to mobilise capital and improve business growth.

SSI Research forecasted that state-owned banks’ profits will increase by 30 percent compared to 2020. Meanwhile, that of private joint stock banks is expected to be over 17.2%. In general, SSI Research believed that banks’ average pre-tax profit growth in 2021 will be 21 percent compared to 2020.

VNDirect Securities Company predicted that the profits of banks will increase in 2021. The banking system is the main channel which the government uses to promote the economic growth. VNDirect expected that the public investment disbursement will be kept at high level and the SBV will maintain the monetary policy easing to accelerate the economic recovery and credit growth in 2021.

Banks will be the first group to benefit from the recovery trend. The recovering rate will be different among banks due to the differences in business strategies, lending portfolios, customer bases, and risk appetite.

However, according to SSI Research, the provisions for credit risks is the factor which lead to profit differentiation. The SBV is proposing the prime minister for approval of the draft amending Circular 01 on restructuring and rescheduling repayment terms for customers hit by the Covid-19 pandemic. according to the latest draft amending Circular 01, banks may have to provision for the credit risks of the restructured debts within an expected period of up to three years instead of not having to provision as specified in the old Circular.

He provisions will affect banks’ profits. Banks that have boosted risk provisioning in 2020 will be under less pressure from the Circular 01 and achieve higher growth.

 

Category: Finance, Vietnam

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