Banks continue to grow profits in the context when some units have improved asset quality and bad debt transparency.
Commercial Joint Stock Bank for Foreign Trade of Vietnam (Vietcombank) contributed nearly half of the profit growth in absolute value with pre-tax profit reaching 11.303 trillion dong, up by 41 percent compared to the same period last year. The remaining 17 commercial banks saw an increase of 13 percent compared to the same period last year.
According to statistics of NDH newspaper, among the three leading positions, Vietcombank continued to hold the first position in net profit value after three years in a row leading the group with 9.075 trillion dong, up by 41 percent compared to the first six months of 2018. Vietnam Technological and Commercial Joint Stock Bank (Techcombank) ranked the second with 4.525 trillion dong of after-tax profit, up by nine percent. This is the second year in a row the bank held the second position. Commercial Joint Stock Bank for Industry and Trade of Vietnam (VietinBank), after being replaced in 2018, continued to be in the third position with 4.307 trillion dong of profit, up by more than one percent.
Military Commercial Joint Stock Bank (MB) surpassed Commercial Joint Stock Bank for Investment and Development of Vietnam (BIDV) and Vietnam Prosperity Commercial Joint Stock Bank (VPBank) to be in the fourth position with after-tax profit of 3.930 trillion dong, up by 29 percent compared to the first half of 2018. Meanwhile, BIDV and VPBank, which ranked the fourth and fifth position in 2018, reported profit decline. BIDV’s profit fell by 4.5 percent to 3.826 trillion dong and VPBank’s decreased by one percent to 3.471 trillion dong.
Considering profit growth, most banks saw profit increase in the first half of 2019, except Export Import Commercial Joint Stock Bank (Eximbank), Saigon Commercial Joint Stock Bank for Industry and Trade (Saigonbank), Viet Capital Commercial Joint Stock Bank (VietCapitalBank), Viet A Commercial Joint Stock Bank (VietABank), BIDV and VPBank.
The system witnessed many bounds. The most typical case is Maritime Commercial Joint Stock Bank (MSB) with profit rising by 161 percent to 460.4 billion dong thanks to the net interest income and net profit from service activities, followed by Lien Viet Commercial Joint Stock Bank (LienVietPostBank) with net profit increasing by 76.7 percent to more than 897.7 billion dong and Vietnam International Commercial Joint Stock Bank (VIB) and Tien Phong Commercial Joint Stock Bank (TPBank) of which profit increased by more than 58 percent to respectively 1.456 trillion dong and 1.295 trillion dong.
The profit growth of banks came from the increase in net interest income thanks to the improvement in the Net Interest Margin (NIM). The Cost to Income Ratio (CIR) fell from 40.5 percent in the first six months of 2018 to 39.8 percent in the first six months of 2019; and the ratio of provisions on total income fell from 24.1 percent to 23.9 percent.
In the opposite direction, Eximbank reported a 29 percent reduction in profit compared to the first half of 2018 with 521 billion dong, while Saigonbank’s profit fell by 21 percent to 70.7 billion dong. BIDV was the only state-owned bank the Big4 banks posted a profit decline of 4.5 percent, reaching 3.826 trillion dong.
By the end of June, lending to customers increased by 4.6 percent compared to the previous quarter and by 8.2 percent compared to the beginning of the year while customer deposits went up by 4.3 percent compared to the previous quarter and 7.4 percent over the beginning of the year. As of June 30th, the total assets of 18 listed banks on three stock exchanges were 7,100 trillion dong, in which equity was 493.7 trillion dong, up by respectively 5.9 percent and 10 percent compared to the end of 2018.
Report of SSI Retail Research pointed out that three banks with the highest growth in lending to customers included VIB (19 percent), Techcombank (15.9 percent) and TPBank (15.3 percent). However, the credit growth (including customer loans and corporate bonds) of these three banks was lower, reaching respectively 17.9 percent, 12.1 percent and 15.9 percent.
Except VPBank, Saigon Thuong Tin Commercial Joint Stock Bank (Sacombank), VietinBank, Eximbank, National Citizen Commercial Joint Stock Bank (NCB) and Vietnam Thuong Tin Commercial Joint Stock Bank (VietBank) which recorded higher mobilisation growth than lending growth, the mobilisation growth of 12 remaining banks was significantly lower than their credit growth.
After the negative growth in the first quarter (Q1), VietinBank achieved more positive development in Q2. In the first six months of 2019, the bank’s mobilisation and lending growth increased by respectively 3.5 percent and 3.9 percent compared to the yearly plans of seven percent and 12 percent. The bank’s customer mobilisation, if including both deposits and issuance of valuable papers, increased by 8.4 percent compared to the beginning of the year.
The mobilisation interest rates on market 1 were stable at 4.1 percent5.5 percent per annum on terms of less than six months, 5.5 percent7.55 percent per annum on terms from six to less than 12 months, 6.4 percenteight percent per annum on terms of 12 months and 13 months. Particularly, some banks with small mobilisation market share applied interest rates of eight to 8.2 percent per annum to terms from nine to 13 months, up by 10-20 bps compared to the previous period.
The total issuance value of valuable papers of 18 listed commercial banks as of June 30th was 340.5 trillion dong, up by 21 percent compared to the end of 2018. However, the total bonds of credit institutions held by these banks also increased by 56.5 trillion dong, raising a question about whether banks are cross-buying bonds of each other to increase the proportion of medium and long-term mobilisation.
The NIM of all banks improved in the first half, mainly due to the higher growth rate of lending than mobilisation. The highest NIM belonged to VPBank with 8.9 percent, followed by MB with nearly 4.7 percent thanks to the contribution of its consumer finance company. Other three banks having NIM of above four percent included HCM City Development Commercial Joint Stock Bank (HDBank), TPBank and Techcombank.
The income from service activities of banks continued to see good growth, reaching 8.238 trillion dong in Q2, up by 18 percent over the previous quarter and 44 percent over the same period of last year.
For the first half of 2019, banks’ service income was 15.237 trillion dong, up by 46 percent. The proportion of service income in total income in the first two quarters of the year reached 10.8 percent, higher than the 8.6 percent recorded in the first half of 2018 and 10 percent recorded in the whole year 2018. The income from insurance business still made large contribution to service income of MB, VPBank, VIB and Techcombank.
Regarding asset quality and profitability, Asia Commercial Joint Stock Bank (ACB) and Vietcombank took the lead with bad debt ratio kept stable at the lowest levels of respectively 0.7 percent and one percent. Their Loan Life Coverage Ratio (LLCR) continuously went up to the highest levels in the system, reaching respectively 162 percent and 178 percent, while their Return on Equity (ROE) was respectively 25.7 percent and 25.2 percent.
Two major banks including BIDV and VietinBank provisioned for risks at 10.7 trillion dong and 7.5 trillion dong, respectively in the first six months of 2019. Their LLC rose to 72.5 percent and 100 percent.
BIDV is still in the process of transparentising bad debts when its debt group five increased by 3.261 trillion dong in Q2 this year, causing the bad debt ratio to increase by 0.1 percent to two percent. If including the bonds of Vietnam Asset Management Company (VAMC), BIDV’s bad debt ratio is currently 2.61 percent.
In addition to some banks which saw asset quality improvement compared to 2018 such as VPBank, VIB, HDBank and Sacombank, some banks recorded fairly sharp rise in bad debt ratio, such as Saigon Hanoi Commercial Joint Stock Bank (SHB) and TPBank.
