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Commercial banks criticized for making fat profit
The profits of banks in 2010 would not be big if compared to their capital, assets and workforce.
To date, most commercial banks have reported their business results for 2010. Contrary to all predictions, most banks which complained that they had a very difficult year turned out to be profitable. The small banks which just shifted from rural banks to urban banks made the profits of 100-200 billion dong, while bigger banks earned 4.5-5.5 trillion dong in pre-tax profit.
In a report reviewing business performance in 2010, a commercial bank wrote that the operation of banks made a big contribution to the 6.78 percent GDP growth rate, because they provided capital to the national economy.
Nevertheless, information about the fat profit of banks in 2010 has made businesses furious. Businessmen say that while the national economy was facing big difficulties, the fat profit for banks was “unreasonable”. Commercial banks have especially been accused of “living on businesses’ distress” when setting up overly high interest rates. They said that the high interest rates have been feeding banks and exhausting businesses. Meanwhile, they should have shared difficulties with businesses in the post-economic downturn crisis.
The director of a big joint stock bank whom Thoi bao Kinh te Vietnam contacted, declined to make comments about his bank’s profit, said that society now seems to be unsympathetic with banks’ profits, though he said that the figures about profit do not tell everything.
According to him, when setting up the targeted profits for every year, banks’ management boards are always put under the pressure of shareholders. Managers of banks have to try to earn more profit and obtain high growth rates.
“In 2010, we set up the target profit already and submitted the plan to the shareholders’ meeting. However, after that, we had to raise the targeted profit by 200 billion dong,” he said.
Banks’ profits are big?
2010 was a difficult year for many banks. This explained why many banks could not fulfill their business plans and had to lower their business targets.
Meanwhile, 2010 was a prosperous year for many other banks, including VP Bank, VIB Bank, Maritime Bank and Ocean Bank. However, the successful bankers themselves said that their achievements were not really good and that they were not really satisfactory with the results. They also said that it is necessary to look into the issue from different angles.
VIB Bank had a pretax profit increase of 72 percent in 2010 in comparison with 2009, and total assets reached 94 trillion dong, an increase of 37 trillion dong. Agreeing that the bank got a good profit in a difficult year, a representative of VIB Bank said that the bank’s profit is the result of a long period of cumulative investment.
“We have strengthened investments in technologies and services, workforce and network and we have been trying to improve corporate governance skills. The year 2010 was when the investments brought profit. We are not reliant too much on lending to businesses any more,” he said.
He went on to say that in 2010, good business results also came from the changes in the brand identification system, from the chartered capital and stockholder equity (4 trillion and 6.573 trillion dong), as well as new support from the foreign strategic partner (CBA - Commonwealth Bank of Australia)
Replying to the accusation that banks set up overly high lending interest rates and refused to share difficulties with businesses, General Director of Ocean Bank said that banks have been sharing difficulties with businesses already. Four or five years ago, the margin interest rate (The gap between the deposit and lending interest rates) was at 4.5 percent on average, while the margin has been narrowed to 2.5 percent. “If the gap continues to be narrowed, banks will face big problems in risk management,” Thu said.
Ocean Bank in 2010 raised its chartered capital sharply from two trillion dong to five trillion dong.
Meanwhile, some analysts have pointed out that though the figures about banks’ profit seem to be big, the actual profit ratio would not be high if compared with other indexes. For example, a lot of commercial banks had low ROE (Returns on equity), 11-15 percent, which were even lower than the interest rates. Regarding the benefits for shareholders, most banks paid dividends of 14-16 percent, and only a few banks could offer more than 20 percent. And if considering the profit per bank officer, one would see that the ratio would not be big because banking is a labor intensive sector.
vietnamnet
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