Many banks confident of early completing profit targets

25-Nov-2020 Intellasia | Dau tu Online | 6:51 AM Print This Post

According to the announced financial statements of 26 banks, banks’ total after-tax profit in the first nine months of 2020 was 76.273 trillion dong, up by 11.5 percent over the same period of last year. In particular, Commercial Joint Stock Bank for Foreign Trade of Vietnam (Vietcombank) continued to take the lead in profit with 12/794 trillion dong of after-tax profit, although this number is 9.4 percent less than the bank’s result in the same period of 2019. Following Vietcombank, three banks with two-digit profit growth included Vietnam Technological and Commercial Joint Stock Bank (Techcombank, 20.6%), Commercial Joint Stock Bank for Industry and Trade of Vietnam (VietinBank, 22.4%), and Vietnam Prosperity Commercial Joint Stock Bank (VPBank, 30.6%).

In addition to the above banks, the top 10 banks with the highest profit number in the first three quarters of 2020 also included Commercial Joint Stock Bank for Investment and Development of Vietnam (BIDV), HCM City Development Commercial Joint Stock Bank (HDBank), and Tien Phong Commercial Joint Stock Bank (TPBank) with profit of respectively 7.062 trillion dong, 4.381 trillion dong, and 3.024 trillion dong. Asia Commercial Joint Stock Bank (ACB) is approaching its pre-tax profit target of 7.636 trillion dong when attaining 6.411 trillion dong of pre-tax profit in the first nine months of 2020.

Han Ngoc Vu, general director of Vietnam International Commercial Joint Stock Bank (VIB) said that the difficulties of the 2020 market are unavoidable due to the epidemic outbreak. However, after the first 10 months of 2020, VIB’s profit reached more than 4.560 trillion dong, officially surpassing the result in 2019 which was 4.080 trillion dong, and equivalent to a growth of 40 percent compared to the same period of last year.

According to a recent report of Fitch Ratings, the business results in the first three quarters of 2020 of Vietnamese banks showed that the pressure on asset quality has declined and profitability has improved thanks to the positive prospect of the economy. Specifically, in the third quarter (Q3) of 2020, the Gross Domestic Product (GDP) of Vietnam increased by 2.6 percent over the same period of last year, and the labour market has been gradually recovering after the shock caused by the Covid-19 epidemic.

Fitch Ratings stated that banks set higher provisions for risks in the first three quarters of 2020, but the better control of operating costs has more or less lessened the burden from the provisioning expenses, contributing to the profit results.

Economic expert Dr Can Van Luc said that banks are diversifying their sources of revenue. In particular, the revenue from service and foreign exchange trading can be considered important sources of revenue and they increased in the last three quarters. Due to the low increase in revenue from lending and some other activities, the proportion of foreign exchange trading sharply rose, while the absolute number was not significantly higher than the past years.

Dr Le Anh Tuan, deputy general director of Investment of Dragon Capital also assessed that the Vietnam’s economy is gradually recovering after the Covid-19 was controlled. The credit demand is not likely to increase in the short term, but will be more positive in the last quarter of the year compared to the first three quarters. This will influence banks’ profit in Q4 of 2020.

According to Fitch Ratings, in 2021, banks’ income will recover thanks to the stricter control of expenses, and the gradually flourishing of lending activities. However, the recovery will more or less be limited due to the narrowing net interest margin, especially in state-owned banks.

Fitch Ratings mentioned that the capitalisation of Vietnamese banks remains thin against certain risks in the domestic environment. However, the recovering economic activities and banks’ profitability may generate sufficient retained profit to support the short-term growth, helping stabilise the capitalisation ratio.

The Department of Forecasting and Statistics (under the State Bank of Vietnam (SBV)) has released the results of a survey on business trends of credit institutions (CIs) in Q4 of 2020. in general, the entire banking system expected the market interest rate level to decline further by 0.1 percentage point.

The overall risks of customer groups increased in Q3 and are expected to continue rising in Q4 of 2020 but at a slower pace. The two group of customers that were assessed by 50 — 52.9 percent of CIs as having higher risks included small and medium-sized enterprises (SMEs) and customers being joint stock companies, limited companies, and private companies.

About 9.3 percent of CIs predicted that all internal factors to negatively affect the performance of their units in 2020, mainly due to the financial capacity factor and the interest rate, credit and exchange rate policies of the units.

Considering outstanding credit, CIs expected a credit growth of 4.7 percent in Q4 of 2020 and 11.4 percent in the whole year. Compared to the survey in June 2020, small private joint stock banks, large private joint stock banks and foreign banks all raised the expectation of their own credit growth in 2020.

Along with the trend of assessing the business situation unfavourable, the number of CIs concerned about having negative pre-tax profit growth in 2020 increased, leading to the lower average expectation in pre-tax profit growth of the whole system. The reason is that banks have to increase their risk provisions.


Category: Finance, Vietnam

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