With high profits in the first three quarters of the year, many banks have nearly reached the profit targets for the whole year 2019. The good news is that many banks continue to forecast that the fourth quarter (Q4) of 2019 profit may increase compared to the other quarters of the year. Q4 is the peak business season of the banking industry.
According to Military Commercial Joint Stock Bank (MBBank), closing the first 10 months of 2019, the separate pre-tax profit of the parent bank reached more than eight trillion dong, completing 96 percent of the year plan of 8.345 trillion dong approved at the Shareholders meeting in April 2019. Since the remaining two months of the year is the peak business period of the banking sector, MBBank is likely to exceed the set profit target.
For Commercial Joint Stock Bank for Industry and Trade of Vietnam (VietinBank), the bank is confident of completing the profit goal of 20 trillion dong assigned by shareholders at the bank’s 2019 annual general meeting.
In the first nine months of the year, Commercial Joint Stock Bank for Foreign Trade of Vietnam (Vietcombank) achieved a pre-tax profit of more than 17.5 trillion dong, completing up to 86 percent of the year plan. It is the highest result of the bank ever.
Regarding credit, Vietcombank boosted lending in the first half of the year and recorded a growth rate of 11.6%. Thus, with the credit limit of 15 percent assigned at the beginning of the year, there is still available room for lending. Vietcombank said that the bank will not ask for more room but boost retail.
Vietcombank has increasingly raised revenue from retail and services. Thus, not only achieving such high profit as mention in the above, Vietcombank also sets an ambition to achieve a profit of two billion US dollars in 2025. The main motivation for growth will be retail and digital banking, in which retail will account for half of the profit (about one billion dong). Regarding digital banking, Vietcombank aims to maintain the first position in the market.
Vietnam Technological and Commercial Joint Stock Bank (Techcombank) ranks the second in the system in terms of profit. The bank set a profit target of 11.750 trillion dong this year, but already achieved nearly 8.9 trillion dong of pre-tax profit in the first three quarters of the year. This shows that Techcombank’s profit target is very close to be fulfilled.
Orient Commercial Joint Stock Bank (OCB) achieved a pre-tax profit of 825 billion dong in Q3 2019, up by 51.6 percent over the same period of last year; and 1.942 trillion dong in the first nine months of the year, up by 15.3 percent over the first nine months of 2018. Although OCB has only completed one third of the profit target of 3.2 trillion dong set for the whole year 2019, OCB’s general director said that in October 2019 alone, the bank attained more than 900 billion dong of pre-tax profit, and it is likely to complete the target, or even exceed it, because this is the peak season of the year.
OCB’s credit growth is currently 20%, but according to Tung, the bank has made efforts to recover debts in order to have more room for lending and boost retail lending to increase capital rotation.
Thanks to the decline of 69 percent in risk provisioning, Asia Commercial Joint Stock Bank (ACB) reported an after-tax profit of 1.549 trillion dong in Q3 2019, up by 18 percent over the same period of last year. In the first nine months of the year, ACB achieved a pre-tax profit of 5.561 trillion dong, up by 16%, partly thanks to the 76 percent reduction in provisioning expenses. The bank’s after-tax profit was 4.447 trillion dong, up by 18%, completing 87 percent of the year plan. Thus, with the pre-tax profit set at 7.279 trillion dong in 2019, ACB is likely to exceed the profit target. ACB’s leader refused to say about the possibility of exceeding target, but said that the risk provisioning pressure has fallen sharply.
Vietnam Prosperity Commercial Joint Stock Bank (VPBank) also recorded 7.199 trillion dong of pre-tax profit in the first three quarters of the year, completing 76 percent of the year plan. In which, the contribution of FE Credit to the parent bank is significant. The last quarter of the year is the golden business time for the bank in general and for FE Credit’s consumer lending. Thus, with a pre-tax profit target of 9.5 trillion dong in 2019, VPBank is confident of completing the plan.
Many banks increase provisions for risks
In addition to the fairly rosy profit picture of the banking sector, many banks have had to increase risk provisioning when their irrecoverable debts (if which provisions for risks must be 100%) increased. VPBank had to set aside 3.522 trillion dong of provisions for risks in Q3 2019, up by 28 percent over the same period of last year. From the beginning of the year, VPBank has increased risk provisioning by nearly 22 percent to 9.993 trillion dong. However, the bank still collected more than 7.199 trillion dong of pre-tax profit and nearly 5.754 trillion dong of after-tax profit, up by 17 percent over the same period of 2018.
The risk provisioning expenses of BIDV reached up to 16.502 trillion dong in the first nine months of 2019, up by 14.8 percent over the same period of 2018. BIDV is also one of the bank that sets high provisions for risks in the banking system. Thus, its pre-tax profit after the first three quarters of the year was only six trillion dong. According to the plan approved by the bank’s shareholders, BIDV targets to record a pre-tax profit of 10.3 trillion dong, mobilisation growth rate of 11%, credit growth rate of 12%, and bad debt ratio of less than two percent in 2019.
OCB’s provisions for risks in the first three quarters of 2019 slightly increased compared to the end of 2018, reaching 632 billion dong.
The banks’ business results in the first three quarters of the year showed that the strong differentiation among banks due to risk provisioning still eroded profits of many banks and vice versa. Dr Vo Tri Thanh said that banks’ profit will gradually improve when the economy grows more sustainably. However, Dr Thanh also noted that bad debts is always an issue for banks’ operations. In fact, the bad debts that were sold to Vietnam Asset Management Company (VAMC) will return to banks after five years and banks must use profits to increase provisions for risks. Banks can only receive risk provisioning reversal and record better profit when they settle these bad debts.
Resolution 42/2017/QH14 on piloting the bad debt settlement of credit institutions (issued in June 2017) has helped improve banks’ bad debt handling process. However, the Resolution allows banks to sell bad debts below book value, as long as the debts are verified by an independent valuation organisation. VAMC’s bonds usually have a term of five years. During this period, banks must provision for risks at 20 percent each year to create a source for handling bad debts when buying back from VAMC. If banks fail to provisions for risks at 20%, they may propose to get a provisioning risk of 10 percent in 10 years. The State Bank of Vietnam (SBV) is proposing that banks holding VAMC bonds with a term of more than five years will not be allowed to pay cash dividends, excluding state-owned banks.
Giving an overview assessment on banking activities, Dr Le Anh Tuan, deputy general director of Investment and Head of Research Department at Dragon Capital said that although the credit growth room this year is somewhat tighter, large-scaled banks which have implemented Basel II standards will be considered for credit growth expansion. In addition, since many banks have promoted revenue from services, their profit in 2019 is forecasted to continue being positive although they are under high risk provisioning pressure.
