From mid-October, banks have started the season for reporting business. Up to now, 13 banks have officially announced their financial reports in the third quarter (Q3) of 2019.
In addition to the fairly positive results of most members, a common downturn in the business result picture of banks in the first nine months of 2019 was the foreign exchange business.
According to survey of BizLIVE, up to nine out of 13 banks (equivalent to 69 percent) recorded reduction in foreign exchange trading activities in the first three quarters of the year, of which three members reported loss.
Vietnam Prosperity Commercial Joint Stock Bank (VPBank) is a typical case. Closing Q3 2019, the bank unexpectedly reported a loss of up to 81 billion dong in foreign exchange trading, while it attained a profit of nearly 218 billion dong in the same period of last year. In the first nine months of 2019, VPBank suffered a loss of over 117 billion dong in this business, while it posted a profit of up to 251 billion dong in the same period of 2018.
VPBank, accordingly, is temporarily leading the banks that reported losses in foreign exchange trading, and also the member that recorded the strongest decline.
Meanwhile, at Vietnam International Commercial Joint Stock Bank (VIB), the foreign exchange segment also did not see improvement when continuing to report a loss of more than 28 billion dong in Q3 2019 alone, doubling the loss in the same period of last year, raising the loss in the first three quarters of 2019 to nearly 115 billion dong, 5.5 times higher than the same period of last year (VIB posted a loss of nearly 21 billion dong in the first nine months of 2018).
At National Citizen Commercial Joint Stock Bank (NCB), although the loss was continued, there was improvement sign as the loss was only above 100 million dong in Q3 2019, compared to the loss of up to 14 billion dong in the same period of 2018. In the first three quarters of this year, NCB suffered a loss of over five billion dong in foreign exchange business, two third less compared to the 16 billion dong of loss in the same period of last year.
For numerous other banks, although the foreign exchange activities still recorded profit, the numbers were significantly lower than the same period of last year.
For Southeast Asia Commercial Joint Stock Bank (SeABank), closing the first three quarters of 2019, foreign exchange activities only brought over 15 billion dong, own by up to 79 percent compared to the 70 billion dong in the same period of last year.
For Bac A Commercial Joint Stock Bank, the nine-month profit result of foreign exchange trading also declined by up to 68 percent to only three billion dong. The main reason was the loss of up to 4.2 billion dong the bank suffered in Q3 2019.
Previously, from early 2019 until mid-April, the US dollar/dong exchange rate and the foreign currency market were fairly stable with good market liquidity. The SBV even acquired a large amount of foreign currency to supplement the foreign exchange reserves.
However, from mid-April 2019, the US dollar/dong exchange rate tended to rise and started to speed up from May 6th, marking the first and most prominent volatility phase in 2019.
In particular, the peak of the US dollar/dong fluctuation was recorded on May 20th, with US dollar selling price reaching up to 23,470 23,495 dong per US dollar at banks, up by nearly 200 dong compared to the 23,300 dong per US dollar which had been maintained stably in the previous time.
According to experts, this exchange rate fluctuation was mainly due to the impact of external factors related to information about the US-China trade negotiations which raised concerns about the possibility of a negative and escalating international trade conflict.
Regarding internal reason, the exchange rate appreciation was partly due to the foreign currency purchase of banks to balance their status after selling foreign currency to the SBV with the expectation of buying US dollar at cheaper price from foreign investment sourcewhich banks hoped to flow strongly into the country but actually did not happen at that time.
Nevertheless, after that, thanks to the flexible management measures of the SBV, the domestic exchange rate has begun to be stabilised.
In the second half of Q3 2019, the US dollar/dong exchange rate continuously fall strongly and rapidly. This development still occurred regardless of the fact that the Chinese yuan exceeded the 7.0 milestone and even reached 7.2 in the conversion with US dollar. The US dollar/dong recorded a sharp fall compared to the fluctuation in Q2 2019, then returned to the zone which is almost unchanged compared to the end of 2018.
On the interbank market, the supply of foreign currency at times piled up and the SBV stopped buying, causing the US dollar exchange rate sometimes dropped below 23,200 dong per US dollar the listed buying rate of the SBV Operation Centre.
