Immediately after the report of the first six months of 2019 business results, Vietnamese banking activities generated new signals, promising a positive year at some members.
Unexpectedly, Vietnam Bank for Agriculture and Rural Development (Agribank) has actively updated basic business results until July 31, 2019. Accordingly, the accumulated profit in the first seven months of this year suddenly increased to 8.2 trillion dong. Compared to the target of 10 trillion dong earlier this year, Agribank has achieved more than 80 percent and become a prospective candidate far beyond the target.
In addition to Agribank, in the large and dominant state-owned commercial banks, the Joint Stock Commercial Bank for Investment and Development of Vietnam (BIDV) has just announced an important event, motivating and promising the acceleration in the second half of 2019: selling capital to foreign investors, expected to raise more than 20 trillion dong to supplement capital, which can be more proactive in meeting Basel II and credit extension.
Those are the two members with remarkable new movements this year. Besides, the lane has also been extended, creating opportunities for some other members to speed up. But, this opportunity does not expand.
Specifically, with the latest updated information, the State Bank of Vietnam (SBV) only loosened the credit growth target to 17 percent for commercial banks that reached Basel II before due date. Most of these banks are preparing actively for completing the last six-month plan.
With interest rate margins narrowing, banks must seek additional revenue from service fees or have room for growth. In the group of joint stock banks, Tien Phong Commercial Joint Stock Bank (TPBank) is one of the members who actively reserved limits to better seize this opportunity. Accumulated pre-tax profit of the first sevens months of TPBank reached 1.888 trillion dong (nearly 60 percent of the profit plan of 2019). Operation report for the first half of this year showed that TPBank owned a relatively low loan-to-deposit ratio (LDR), only 70.69 percent. In particular, the ratio of short-term funds for medium and long-term purpose to June 30, 2019 was only about 25 percent. Accordingly, with higher credit growth target and more favourable use of capital, TPBank promises to continue to maintain high profit growth rate and exceed the profit target this year.
Through the first half of 2019, with the progress made, most commercial banks have reached over 50 percent of the yearly target. And as often seen over the years, the common characteristics of the economy, production and business activities, the speed of implementation of the plan is often pushed higher in the second half. However, the last six months of 2019 with Vietnam’s banking system in general is facing a challenge: bad debt tends to increase.
The financial statements of many commercial banks at the end of the second quarter of 2019 showed that the actual bad debt ratio was higher than the end of 2018. Noticeably, the second half of this year, the amount of bad debt sold to the Vietnam Assets Management Company (VAMC) with five-year term in the second half of 2014 will mature.
However, because it has been dilated in the last five years, according to the provisions, it has been set up for 20 percent per year, so the pressure is forecasted not to be too large to hold the profit growth rate. Even at some members, the dual goal is set here. With the information given at the beginning of the year or recently updated, cases such as Agribank and BIDV, Vietnam Thuong Tin Commercial Joint Stock Bank (Vietbank) have a step-by-step plan to finalise bad debts at VAMC.
Meanwhile at TPBank, dual goals have also been set. Specifically, with 1.888 trillion dong of pre-tax profit for the first seven months of the year, the remaining 1.312 trillion dong for the last five months (according to the plan of 3.2 trillion dong for the whole year) has advantages with the ability to grasp good opportunity. Notably, TPBank made full provision for dealing with all bad debts sold to VAMC in the first seven months of 2019, the goal of clearing bad debts will be realised this year as planned (VAMC bond balance of TPBank at the beginning of the year was 756 billion dong).
The value of the dual goal does not stop there. At the same time, having just achieved Basel II before due date, and not being burden by debt at VAMC such as Joint Stock Commercial Bank for Foreign Trade of Vietnam (Vietcombank), Military Commercial Joint Stock Bank (MBMBBank), Vietnam International Commercial Joint Stock Bank (VIB), Vietnam Technological and Commercial Joint-Stock Bank (Techcombank) and TPBank, the prospect of operation is expected to be a little bit more in 2020, continuing to be to show good and efficient growth rates in the leading group of the system.
