Commercial Joint Stock Bank for Investment and Development of Vietnam (BIDV, stock code: BID) has released its consolidated financial statement in the second quarter (Q2) of 2020. As of June 30th 2020, BIDV’s credit still increased by two percent but the profit from lending activities fell by 24 percent over the same period of last year. The main reason is the decline of up to 5.5 percent in interest income while the interest expenses increased by up to 4.6%.
The low effectiveness of BIDV’s lending segment is due to the bank’s output interest rate cut in the recent time to support borrowers while the costs of input capital were more expensive. The low-cost capital (demand deposits) of BIDV as of June 30th 2020 slightly dropped, while the high-cost capital sources such as term deposits and valuable papers significantly rose by 28%.
The highlight of BIDV in Q2 2020 is the sharp increase in the bank’s non-interest activities. Specifically, the net profit from service activities rose up by 7.8 percent to 1.178 trillion dong, the net profit from foreign exchange trading inched up to 413 billion dong. The bank’s profit from securities trading sharply increased by five times compared to the same period of last year for trading of business securities (reaching 240 billion dong) and 6.3 times for trading of investment securities (reaching 797 billion dong).
Along with the efficiency of non-interest business activities, BIDV continued to be successful when strongly cutting operating costs by 20.6 percent compared to the same period of last year.
With positive business results in Q1 2020, in the first six months of the year (H1), BIDV’s pre-tax profit was 4.454 trillion dong, down by 5.4 percent compared to the same period of last year. Compared to the 28 percent profit decline in the same period of Q1 2019, BIDV’s profit fall has slowed down.
The reason of the decline in H1 remains credit. Specifically, in H1, BIDV’s net interest income dropped by 8.8 percent over the same period of 2019. In addition, the profit from other activities of the bank fell by 29 percent to 1.699 trillion dong.
The main growth driver of BIDV in H1 came from non-interest activities. In the period, the bank recorded 2.264 trillion dong in net profit from services, up by 15%; 832 billion dong in foreign exchange trading, up by 13%; 421 billion dong in trading of business securities, up by nearly five times compared to the same period of last year; and 668 billion dong in trading of investment securities, while it was a loss of 264 billion dong in the same period of last year.
In H1, BIDV’s provision expenses slightly fell by 5.6 percent to 10.142 trillion dong. This is also one of the reasons why the bank’s profits did not plummet.
Regarding the quality of loans, the bank’s absolute bad debts increased by 16.7 percent to 22.768 trillion dong. Notably, its irrecoverable debts accounted for more than 13.342 trillion dong (up by 17 percent compared to the beginning of the period). Accordingly, BIDV’s bad debt ratio increased from 1.74 percent to nearly two percent. The bank has cleared off all the bonds of Vietnam Asset Management Company (VAMC).
According to BIDV, in the near future, the bank will continue to closely monitor the system situation, review the impact of the Covid-19 epidemic to run its business in the direction of increasing non-interest income, enhance e-banking services, maximise revenue sources and control costs.
