The positive six-month results gave many banks hope that the business picture would change significantly at the end of the year.
The first half of the year soft-landed, the second half of the year accelerated
Nghiem Xuan Thanh, Chair of Bank of Joint Stock Commercial Bank for Foreign Trade of Vietnam (Vietcombank) said, in 2020, the bank advocated soft landing, with open target profit growth, loan growth plan of 10%, total asset increase at seven percent, and capital mobilisation growth by eight percent. However, by the end of June 2020, Vietcombank’s profit reached approximately the same period (over 11 trillion dong), although credit increased more slowly (up 3.4%).
While in the last six months of the year, Vietcombank credit growth as planned for the whole year was 10 percent (i.e., credit for the previous six months of the year would double that in the first six months). The profit would skyrocket, exceeding $1 billion in 2019. Another reason why Vietcombank could accelerate profit in the second half of the year was that the bad debt was well controlled so that the provision reversal could return to gain by the end of the year.
Similarly, Vietnam Prosperity Joint-Stock Commercial Bank (VPBank) had set a profit target of 2020 equivalent to 2019 (more than 10 trillion dong). Still, the first six-month profit estimated at 6 trillion dong, the possibility of exceeding the year target was within reach.
Vietnam Technological and Commercial Joint-Stock Bank (Techcombank) also aimed to increase profit this year by only one percent compared to last year. However, Ho Hung Anh, Chair of Techcombank’s Board of directors, believed that the bank’s business plan would change in Q3 and Q4 in case of the domestic and global economy recovering quickly.
Pham Quoc Thanh, general director of HCM City Development Joint Stock Commercial Bank (HDBank), said that initially, HDBank’s Board of directors thought that Covid-19 would affect 15 percent of the bank’s outstanding loans. Still, so far, only four percent of the balance had been affected. Therefore, the business results in 2020 were not worrisome. In Q1/2020, HDBank’s balance increased by nearly six percent, the profit before tax of individual banks in the first six months was likely to be over 2.3 trillion dong, an increase of 26 percent over the same period.
Credit might rebound in some industries
According to Nguyen Dinh Tung, general director of Orient Commercial Joint Stock Bank (OCB), free trade agreements had just been signed, while some markets were facing difficulties, which would cause strong inflows of foreign direct investment into Vietnam. Some industries would have opportunities to thrive. When workers had jobs, purchasing power increased, demand for credit investment, consumption would also rise.
With the above positive signals, the economic recovery would quickly lead to an increase in loan demand. Maybe in Q4/2020, credit growth would turn up, Tung hoped. However, credit growth was uneven in all areas, especially import-export credit might still face difficulties.
Some banks had picked up the credit of industrial parks. Do Minh Phu, Chair of Tien Phong Commercial Joint Stock Bank (TPBank)’s Board of directors, said the bank had prepared products to lend industrial parks to welcome the shift of foreign investment into Vietnam in the near future, based on a careful appraisal.
It could be said that banks with flexibly shifting credit structure, controlling credit portfolio, diversifying revenue sources, etc., were standing behind the epidemic. VPBank had strengths in consumer credit, lending to small and medium-sized businesses, small businesses, etc., but had quickly shifted towards home loans, loans to large corporate customers.
In addition to real estate lending, Techcombank also diversified revenue through issuing bonds, transaction banks, insurance, etc. HDBank also promoted investment in corporate bonds, government bonds, valuable papers, safe products with high profits. Vietcombank strived to increase the proportion of non-service income to 35%, focusing on cards, insurance, foreign exchange business, trade finance, and so on.
