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Despite big difficulties, banks still obtain satisfactory profits
Most commercial banks were hesitant when setting up high goals for the business plan in 2011 earlier this year. However, despite the big challenges, they now can be sure that the profits this year would be satisfactory.
The big challenges appeared right at the beginning of 2011, when banks had to raise the deposit interest rates in order to attract more depositors in the context of high inflation.
Especially, banks had to raise the deposit interest rates to the sky high levels in the second and third quarters of the year, when the inflation rate even exceeded the targeted level. Though the central bank instructed commercial banks not to pay more than 14 percent per annum in interest rates for deposits, the actual interest rates banks had to pay were much higher, at 18-19 percent. Especially, a lot of commercial banks, which tried to mobilize capital to ensure their liquidity, offered the rates of up to 20-21 percent.
The higher deposit interest rates meant higher input costs, while banks did not have much room to push up their lending, because they have been told not to let the credit growth rate climb to over 20 percent this year. This means that banks’ credit activities have been gradually narrowed. Meanwhile, lending is considered the main bread earner of banks.
In fact, a lot of banks are believed to use up their “quotas”. The outstanding loans of a lot of commercial banks are still far below the limit of 20 percent.
The report released by the State Bank of Vietnam shows that the total deposits at credit institutions by September 23, 2011 had increased by 9.82 percent in comparison with the end of the previous year, but decreased by 0.94 percent in comparison with the previous month, of which the dong credit dropped by 0.49 percent, and foreign currency credit by 2.27 percent
Despite a lot of big difficulties in the fiscal year 2011 due to the tightened monetary policies applied by the central bank with an aim to fight inflation, banks still have been performing much better than the businesses in other business fields.
By September 30, 2011, the pretax profit of Sacombank, not including subsidiaries, had reached 2174 billion dong, while the yearly targeted level is 2800 billion dong. It is now clear that the 3 trillion dong profit is within the reach of the bank.
In the first nine months of 2011, the pretax profit of Dong A Bank was 1000 billion dong, which means that the bank has fulfilled 77 percent of the yearly plan.
HD Bank has reportedly reached the pretax profit of 473 billion dong, fulfilling 80 percent of the yearly plan.
Techcombank, one of the biggest commercial banks in Vietnam, only got 1500 billion dong in pretax profit in the first six months of the year, far below the targeted level of 4000 billion dong this year.
However, this has been in no way worrying Techcombank’s management board. The bank’s General Director Nguyen Duc Vinh said that in order to ensure the safety in the bank’s operation, the bank has been following a strategy on gradually increasing the revenue from banking services and decreasing the revenue proportion from lending.
Vinh went on to say that Techcombank has been restructuring its operation by focusing on lending to good clients with healthy financial capability, prioritizing to lend to the enterprises which operate in the production sector and export key products.
In fact, some other banks still cannot fulfill half of the business plan set up for 2011. Meanwhile, Thoi bao Ngan hang has quoted Tran Bac Ha, Chair of the Bank for Investment and Development (BIDV), as saying that the bank has lowered the lending interest rates, therefore, the bank would have to reduce the targeted profits.
However, Dr Le Tham Duong from the HCM City Banking University said that with an aim to ensure the safe operation, when assessing the business results of banks, it is necessary to keep an overall viewpoint instead of only focusing on figures.
vietnamnet, TBKTVN
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