The first half of 2020 has passed. Unlike previous years, the unexpected Covid-19 pandemic has affected many businesses, including banks.
Before the Covid-19 pandemic happened, many commercial banks recorded series of continuous profitable quarters with double-digit growth rates, or even higher.
However, in the first six months (H1) of 2020, negative results have seen in many banks. Even large commercial banks which posted impressive profit growth over the past time such as Commercial Joint Stock Bank for Foreign Trae of Vietnam (Vietcombank), Commercial Joint Stock Bank for Investment and Development of Vietnam (BIDV), or Lien Viet Post Commercial Joint Stock Bank (LienVietPostBank) have proactively set prudent targets.
Notably, the financial statement in the second quarter (Q2) of Nam A Commercial Joint Stock Bank showed that in H1, the bank’s business still recorded positive growth with slight increase of 7.2 percent in total operating income, reaching 1.194 trillion dong. However, its operating expenses increased by 14.4 percent while the provisions for credit risks soared up by 6.3 times, causing the bank’s H1 profit to remain only 201 billion dong, down by up to 54.6 percent compared to the result in the same period of last year. Compared to the profit goal of one trillion dong assigned by the shareholders meeting this year, NamABank has only completed 25%.
Previously, NamABank had a fairly successful year in 2019 when most of its business targets were achieved, or even exceeded the plan with 26 percent increase in total assets, 32.2 percent increase in mobilisation from market 1, and 32.9 percent increase in lending to market 1, compared to 2018. The bank’s pre-tax profit reached nearly 925 billion dong, up by 24 percent compared to 2018, exceeding the assigned by 16%. Year 2019 marked the bank’s record high profit in its history.
Nevertheless, as mentioned in the above, in the first two quarters of 2020, NamABank’s performance has significantly declined.
Similarly, Kien Long Commercial Joint Stock Bank (Kienlongbank) also recorded sharp profit reduction in H1 when most of the bank’s business segments showed signs of decline. In Q2 alone, the bank recorded pre-tax profit of nearly 46 billion dong, down by 37.8 percent compared to the same period of 2019. In the first two quarters of 2020, Kienlongbank’s pre-tax profit was 103 billion dong, down by 30.4 percent over the same period of last year. With this result, the bank has only completed 13.7 percent of its profit plan for 2020 (750 billion dong).
In addition, the credit quality of Kienlongbank also got worse when total bad debts rose by 6.6 times compared to the beginning of the year to 2.249 trillion dong. The bad debt ratio, thus, was pulled up to 6.59 percent of total lending, compared to just one percent at the beginning of the year.
For BIDV, the bank achieved a record high profit of nearly 10.9 trillion dong by the end of 2019, up by 15.8 percent compared to 2018. However, in H1 2020, its business results suddenly dropped by 5.4 percent compared to the same period of 2019 to 4.454 trillion dong.
Meanwhile, by the end of June, BIDV also recorded a decline of up to 2.93 percent in total assets compared to the beginning of the year. Its credit growth resumed to positive again (it was negative in Q1 2020) but remained modest at only two percent.
According to the recent report of Bac A Commercial Joint Stock Bank (BacABank), the Q2 pre-tax profit of the bank fell by 8.5 percent over the same period of 2019, reaching nearly 175 billion dong. In the first two quarters of the year, the net profit from business activities of BacABank fell by 6.2%, causing its pre-tax profit to decrease by nearly 19 percent compared to the same period of last year, along with the sharp rise of provisions for risks of over 45%.
Bright spots
In addition to banks which saw signs of discontinuous profit growth, the banking industry picture in H1 still recorded bright colours with good profit growth of many banks.
Maritime Commercial Joint Stock Bank (MSB) is an example. In the past six months, most of the banks’ businesses achieved sharp profit increase, including net interest income (68.2%), net profit from service activities (73.4%), net profit from foreign exchange trading (twice), net profit from trading of investment securities (eight times), etc.
Accordingly, despite the increase of 57.6 percent in operating expenses and 88.4 percent in provisions for credit risks, the bank still attained 974 billion dong of profit in the first two quarters of 2020, up by up to 72 percent over the same period of 2019.
Meanwhile, at Southeast Asia Commercial Joint Stock Bank (SeABank), although the two main activities of the bank which are lending and service recorded slight decline in Q2, the revenue from other activities such as foreign exchange trading, trading of business securities and other activities developed significantly. This helped the bank’s pre-tax profit in Q2 grow by 39 percent over the same period of 2019, leading to an increase of 64 percent in the H1 pre-tax profit over the same period of 2019, reaching 669 billion dong.
For Vietnam Prosperity Commercial Joint Stock Bank (VPBank), credit continued to bring a huge amount of profit of over 15.7 trillion dong in the first two quarters, up by nearly nine percent over the same period of last year. Other activities of the banks also posted good development with 12 percent increase in profit from service activities, 4.2-time increase in trading of business securities, 2.2-time increase in trading of investment securities. They are the important reasons that helped the bank record a pre-tax profit growth of nearly 52 percent in H1 2020.
Similarly, many other banks also achieved good profit growth in the first two quarters of 2020, such as Commercial Joint Stock Bank for Industry and Trade of Vietnam (VietinBank, 39.8%), HCM City Development Commercial Joint Stock Bank (HDB, 31.5%), Vietnam International Commercial Joint Stock Bank (VIB, 29.5%), Tien Phong Commercial Joint Stock Bank (TPB, 25.6%), etc.
Under the impact of the Covid-19 pandemic, 2020 is forecasted to be a tough year for the whole economy in general and the banking industry in particular.
However, this can be considered as a “test” to test the resistance of Vietnamese banks to abnormal events and risks.
For banks with a solid foundation and a good preparation and strategy, a positive result can still be expected. And as above, the business results in H1 have shown the differentiation between banks.
