With profits reaching a trillion dong and more in the first quarter (Q1) 2018, information of Dau Tu Chung Khoan newspaper showed that Commercial Joint Stock Bank for Foreign Trade of Vietnam (Vietcombank, VCB) is likely to soon increase its 2018 profit plan from 13 trillion dong to 14 trillion dong. Previously, at the bank’s annual general meeting (AGM), VCB raised the profit target in 2018 once from 12 trillion dong to 13 trillion dong.
The confidence of VCB is thanks to its significant profit attained in Q1, which was 4.359 trillion dong, up by 59.3 percent compared to the same period of 2017. This is a record high Q1 growth of VCB. Other indicators of VCB were also very positive in Q1, including 6.197 trillion dong of net interest income, up by 17.5 percent compared to the same period of 2017. In particular, the service area recorded 881 billion dong of net profit, up by 35.5 percent.
From 2018, VCB expects to increase its retail credit proportion in order to achieve higher Net Interest Margin (NIM). This proportion may surpass 40 percent and even nearly 50 percent. Specifically, VCB focuses on retail lending with secured assets, instead of unsecured loans as a trend in some other banks.
In addition to the high profit in business, VCB also earned hundreds of billion dong from the divestments in other credit institutions. In particular, VCB collected 340 billion dong from the divestment in Saigonbank and Cement Finance Company (CFC), and 172 billion dong from the divestment in Orient Commercial Joint Stock Bank (OCB). Currently, VCB is holding shares of Eximbank and MB. According to Hochiminh Securities Company (HSC), the divestments from the above five credit institutions may bring a profit of nearly 2.5 trillion dong to VCB.
For Asia Commercial Joint Stock Bank (ACB), the profit plan of 5.699 trillion dong set in 2018 seems to not very high compared to the bank’s current capability. ACB’s pre-tax profit this year is even predicted to surge to over six trillion dong (up by 141 percent) as it no longer has to provision for the debts of the group of six companies and the bonds of Vietnam Asset Management Company (VAMC).
In Q1 2018, ACB’s profit was 1.491 trillion dong, up by 151 percent over the same period of 2017. This year, the bank aims to grow credit by 15 percent as assigned by the State Bank of Vietnam (SBV), expand both deposits from customers and total assets by 18 percent. Do Minh Toan, general director of ACB said that the bank’s NIM has increased over the years. To improve this indicator, ACB has promoted retail strategy, collection of bad debts and balanced mobilisation and lending.
For Vietnam Prosperity Commercial Joint Stock Bank (VPBank), analysts from MB Securities Company (MBS) said that the yield from consumer credit market will help improve the bank’s NIM to 9.42 percent in 2018.
With fairly low penetration level in the Vietnam’s consumer credit market, the favourability of current legal regulations as well as the dominance of its finance company FE Credit, VPBank still can dominate this niche market in the short term. This segment is expected to contribute 27 percent to the total loans in 2018 of the bank (up by 39 percent compared to 2017).
That is also the basis for VPBank to target 10.8 trillion dong of pre-tax profit in 2018 and it may also surpass this target. Closing Q1 2018, the consolidated pre-tax profit of VPBank reached 2.619 trillion dong.
Not until now, right in the recent season for AGM season, many banks have forecasted that the performance of the sector would prosper this year and launched two scenarios of profit growth.
In the first scenario, the growth is in line with business targets, while in the second scenario, the profit is expected to exceed the plan when the bank’s credit growth limit is loosened. The prosperity of the market and warming of some investment channels such as securities and real estate have attracted customers to borrow loans for purchasing houses, and expanding business and production activities, etc.
At the same time, one of the bad debt bottleneck has been removed since the government issued Resolution 42/2018. As a result, banks have not only reduced risk provisioning but also reversed the risk provisions set aside previously. For example, in Q1 2018, VCB recorded 1.5 trillion dong off-balance sheet items, settled bad debts, and reversed provisions.
In 2018, VCB targets to restructure its credit portfolio in the direction of reducing its outstanding loans of corporate customers having declining financial situation and customers with low interest rates and low overall efficiency. In addition, the bank will control the growth rate of medium and long-term loan, develop customers by chain, promote cross-selling, and focus on low-cost mobilisation and foreign currency mobilisation.
For the above reasons, SSI Research forecasted that VCB’s profit may rise by 33 percent in 2018, far exceeding the plan VCB submitted to its shareholders committee for approval this year.
Specifically, according to SSI Research, VCB’s pre-tax profit in 2018 may reach 15.107 trillion dong. SSI Research assumed VCB’s credit growth at 18 percent and NIM at 2.48 percent compared to the 2.47 percent in 2017.
In addition, VCB may earn about 1.640 trillion dong from the divestments at finance companies and credit institutions such as CFC, OCB, HVN (Vietnam Airlines Joint Stock Corporation), EIB (Export Import Commercial Joint Stock Bank) and MBB (Military Commercial Joint Stock Bank). The bad debt ratio of VCB is expected to be 1.14 percent, slightly down compared to the 1.23 percent recorded in 2017.
After announcing the merger with Petrolimex Group Commercial Joint Stock Bank (PGBank) which is expected to complete in August 2018, Hochiminh city Development Commercial Joint Stock Bank (HDBank) said that its pre-tax profit target in 2018 has been raised from 3.933 to 4.712 trillion dong. According to leader of HDBank, as of May 2018, the bank’s credit growth has reached over 14 percent. Meanwhile, closing Q1 2018, the consolidated profit of HDBank was 1.045 trillion dong, in which HDBank alone accounted for 851 billion dong, up by 201.8 percent over the same period of 2017, completing 27.5 percent of the annual plan.
With bad debts controlled at 1.22 percent, HDBank has expanded its customers by over 48,504 individual customers, 700 corporate customers, up by 103 percent compared to late 2017. HD SAISON, a joint venture with Credit Saisonthe Japanese leading consumer finance and card, has served over 3.9 million customers, up by 151.91 percent compared to the same period of 2017.
Meanwhile, in addition to the positive profit number in Q1 2018, general director of ACB said that the bank will strive to tackle bad debts this year to reverse about 500 billion dong of risk provisioning into profit. Thus, ACB is likely to exceed its profit target.
With profit in Q1 2018 of 600 billion dong, 2.4 times higher than the same period of 2017, completing 30 percent of the annual plan, OCB said that it is likely to achieve higher profit than the target set in 2018. OCB aims at two trillion dong business target, two times higher than the realised figure in 2017. The bank also sets total asset target at 115.7 trillion dong, up by 37 percent; mobilisation at 104.407 trillion dong, up by 36 percent; and total outstanding loans of market 1 at 60.679 trillion dong, up by 25 percent.
The profit target set by OCB this year is considered a breakthrough compared to the previous years. However, OCB’s general director said that OCB is most likely to recover the entire bad debts worth 728 billion dong in VAMC’s bonds and will not have to provision for risks. OCB has not yet included this possibility in its estimated pre-tax profit of two trillion dong in 2018.
It can be seen that most leading banks attained prosperous business performance in the first five months of the year with profits of trillions dong. According to the research organisations, although the credit growth in 2018 may be lower than 2017, the profit of the entire sector will rise by about 20-25 percent. Thus, it is forecasted that many banks will adjust their profit plan this year.
