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Banks profit despite economic woes
Benefiting from high interest rates, most of the nation's major commercial banks managed to post healthy earnings and remain profitable during 2011 despite restrictions on credit growth and ongoing economic difficulties.
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| Customers conduct transactions at Habubank. In 2011, most of the nation's major commercial banks managed to post healthy earnings and remain profitable. |
Vietinbank was the nation's most profitable commercial bank last year, according to its chairman, Pham Huy Hung.
Vietinbank reported earnings of over VND8,000 trillion (US$381 million), an increase of 76 per cent over 2010 totals. Profits, however, fell below the target set for the year, reaching just VND8.5 trillion ($404.8 million). Hung, however, said the bank had targeted 20-per-cent higher profits in 2012.
Nguyen Ngoc Bao, chairman of Agribank, the largest State-owned bank, told the online newspaper vnexpress that Agribank's pre-tax profits in 2011 were at a level equivalent to those of the previous year. Agribank was able to maintain good liquidity despite economic obstacles and was able to lower its bad debt ratio to from 6.67 per cent in 2010 to below 6 per cent last year.
Vietcombank has announced a 2011 profit of VND5.7 trillion ($271 million), an increase of 4 per cent over the previous year, while several other commercial banks – including Eximbank, Sacombank, Asia Commercial Bank, Millitary Bank and Techcombank – were expected to post profits of over VND3 trillion ($143 million). VP Bank's earnings topped VND1 trillion ($47.6 million), a year-on-year surge of 70 per cent.
Many banks continued to worry, however, that their earnings on equity remained low. An official of a Ha Noi-based bank who asked to remain anonymous said that, compared to other businesses which were heavily dependent on borrowing, bank profits seemed meagre.
Former State Bank of Viet Nam Governor Cao Sy Kiem said that the evaluation of a bank's success should be based on assets and capital. By that measure, only a third of commercial banks were able to post solid profits, while another third demonstrated low liquidity and higher levels of bad debt.
Current State Bank of Viet Nam Governor Nguyen Van Binh told the National Assembly in December that annual profits of VND1-2 trillion ($47.6-95.2 million) should be considered low for a bank with charter capital of VND3-5 trillion ($143-238 million) and assets of VND50-60 trillion ($2.38-2.86 billion).
The profits of Vietnamese commercial banks were only adequate compared to those of other business groups, he said, adding that the real profit of a bank was the final residue after deducting all expenses – including provisionary funds for bad debts, allocation for mandatory reserves, and tax payments.
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