Vietnamese banks have higher profitability than other banks in marginal markets

27-Feb-2019 Intellasia | Dau tu Chung khoan | 6:00 AM Print This Post

According to Viet Dragon Securities Company (VDSC), in 2018 2020 period, the profitability of Vietnamese banks is higher than other banks in regional markets with average Return on Equity (ROE) of 19.8 percent and average profit growth of 23.2 percent (compared to the 15.9 percent of banks in other marginal markets).

In fact, although the credit growth in 2018 was only 14 percentthe lowest in the past four years, the entire banking system still recorded high average profit growth, reaching up to 50 percent in some banks. The growth of profits is higher than the growth of capital has helped the average ROE to reach from 19 percent to 21 percent.

More specifically, Viet Capital Securities Company (VCSC) said that the six banks with the highest ROE in 2018 included Military Commercial Joint Stock Bank (MBBank), Tien Phong Commercial Joint Stock Bank (TPBank), Vietnam Technological and Commercial Joint Stock Bank (Techcombank), Vietnam Prosperity Commercial Joint Stock Bank (VPBank), Asia Commercial Joint Stock Bank (ACB), and Commercial Joint Stock Bank for Foreign Trade of Vietnam (Vietcombank) with ROE reaching respectively 19.4 percent, 20.8 percent, 21.5 percent, 22.8 percent, 25.1 percent and 27.7 percent. VPBank recorded the second highest profit in the system after Techcombank, but was above Techcombank in terms of profitability ratio.

Considering the operational efficiency on total assets, Techcombank and VPBank attained the highest Return on Assets of above two percent by the end of 2018, while other banks’ ROA was ranging from 1.4 to 1.8 percent.

In VPBank’s financial statement in the fourth quarter 2018, the bank’s profit was 3.073 trillion dong, up by more than 23 percent compared to the same period of 2017. The factor that helped VPBank maintained its high profit growth in recent year is its subsidiary FE Credit. This finance company contributed about 35 percent of VPBank’s total profit in 2018. It should be noted that this number was lower than the average contribution of FE Credit several years before (about 50 percent).

Although consumer lending is a risky credit activity, it brings high profits and banks do not have to set aside large provisions for that. The Net Interest Margin (NIM) of this credit type is also several times higher than lending to economic organisations. This helps banks having direct finance company make more profits.

At HCM City Development Commercial Joint Stock Bank (HDBank), HD Saison finance company contributed 900 billion dong in the total 4.005 trillion dong pre-tax profit the bank achieved in 2018, up by 65.7 percent over 2017. That is also the record high profit achievement in the bank’s history.

As of December 31st 2018, HDBank’s total assets reached 216.108 trillion dong, up by 14.1 percent. The bank’s total mobilisation was 191.588 trillion dong, equity was 16.828 trillion dong (up by 14 percent), and ROE and ROA ratios respectively reached 20.27 percent and 1.58 percent.

According to statistics of the State Bank of Vietnam (SBV), by the end of November 2018, the total assets of credit institutions (CIs) were more than 10,800 trillion dong, up by 8.23 percent compared to the beginning of the year; while the equity was 785.660 trillion dong, up by 10.02 percent and charter capital was 570.800 trillion dong, up by 11.4 percent.

Regarding ROA, after excluding CIs with negative equity, the highest ROA belonged to the group of finance and financial leasing companies with 3.02 percent, followed by the group of banks for social policies with 1.02 percent. ROA of the group of state-owned banks was only 0.52 percent, lower than the 0.76 percent of private joint stock banks and 0.88 percent of the group of joint venture banks and banks with 100 percent of foreign capital. Overall, the ROA of the entire system averaged at 0.7 percent by the end of the third quarter 2018.

Regarding ROE, the group of finance and financial leasing companies also took the lead with 13.83 percent, followed by the group of people’s credit funds with 12.95 percent. ROE of banks with dominate state-ownership reached 10.21 percent, higher than the 9.88 percent average ROE of private joint stock banks. These are the four groups of CIs having higher ROE than the sector’s average level (9.06 percent). The group of joint venture banks, cooperative banks and banks for social policies recorded ROE of respectively 5.7 percent, 3.22 percent and 5.38 percent.

The group of finance and financial leasing companies also was the leader in another important indicator to assess profitability is NIM. Statistics of HCM City Securities Company (HSC), NIM of FE Credit was nine percent being in the leading group, much higher than that of commercial banks. Orient Commercial Joint Stock Bank (OCB), Vietnam International Commercial Joint Stock Bank (VIB) and Tien Phong Commercial Joint Stock Bank (TPBank) were the three banks recording impressive NIM growth in 2018 from below three percent in the end of 2017 to 3.5 four percent in 2018.

In 2019, the credit growth plan is similar to 2018, which is about 14 percent. However, banks expect that the profit growth momentum is still maintained at high level thanks to the improvement of NIM. According to BVSC, the profit of listed banks will increase by about 13.5 percent in 2019.

 


Category: Finance, Vietnam

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