The Top five banks with the largest profit has never been as unpredictable as now as the competition for the second and third place is extremely intense.
Being in the top position, Commercial Joint Stock Bank for Foreign Trade of Vietnam (Vietcombank) has steadily consolidated its position with a pre-tax profit of 5.8 trillion dong in the first quarter (Q1) 2019, up by 35 percent over the same period of 2018. The bank’s profit result is also the highest among listed companies on the stock market.
In 2019, Vietcombank aims to achieve 20 trillion dong of profit. Accordingly, the bank has completed nearly 30 percent of its annual plan. According to Bao Viet Securities Company (BVSC), with two strengths including capital advantage and leading asset quality in the system, the profit growth potential of Vietcombank is still very large in the future, especially when the bank expands retail banking segment.
The Net Interest Margin (NIM) of Vietcombank may be affected in 2019 because the cheap capital source from the State Treasury may fall in 2019 due better public investment than 2018. However, the bank may attain unexpected revenue related to bancassurance field.
While Vietcombank’s leading position is more and more solid, the race for the second and third position is very fierce. Six banks are potential candidates for the runner-up position in terms of profit when they set similar pre-tax profit targets of around 10 trillion dong in 2019.
In particular, Vietnam Technological and Commercial Joint Stock Bank (Techcombank) sets a slightly higher target of 11.750 trillion dong of pre-tax profit; followed by Commercial Joint Stock Bank for Investment and Development of Vietnam (BIDV) with 10.3 trillion dong; Military Commercial Joint Stock Bank (MBBank) with 9.560 trillion dong, Commercial Joint Stock Bank for Industry and Trade of Vietnam (VietinBank) and Vietnam Prosperity Commercial Joint Stock Bank (VPBank) with 9.5 trillion dong. Notably, Commercial Joint Stock Bank for Agriculture and Rural Development of Vietnam (Agribank) also ambitiously aims at a pre-tax profit of 10 trillion dong this year.
Previously, in 2018, Techcombank ranked the second in profit, far exceeded BIDV, VPBank and VietinBank with a profit of more than 10.6 trillion dong; followed by BIDV, VPBank, MBBank, Agribank, VietinBank, etc., respectively.
Compared to two years ago, the 2018 profit ranking recorded major changes and this situation is likely to continue this year as some banks start to see difficulties and want to slow down their growth, while some other banks want to return to the track and speed up their growth.
In fact, the business results in Q1 2019 of the above banks also caused many surprises.
After being knocked out of the Top 5 in 2018 due to the loss of more than 800 billion dong in Q4 2018, VietinBank started to return to the track with a pre-tax profit reaching 3.151 trillion dong in Q1 2019, exceeding Techcombank’s and BIDV’s, etc.
The pre-tax profits of Techcombank, BIDV, MBBank after the first three months of 2019 were relatively close to each other, reaching respectively 2.617 trillion dong, 2.521 trillion dong, and 2.424 trillion dong. Meanwhile, VPBank seemed to slightly lag behind with a 32 percent decline in Q1 2019 compared to the same period of 2018, reaching only 1.783 trillion dong, just slightly higher than the profit of Asia Commercial Joint Stock Bank (ACB) with 1.707 trillion dong.
For VietinBank, capital raising is still the key to determine the bank’s business results. At the Annual general Meeting (AGM), VietinBank’s shareholders approved the plan to distribute all dividends in 2018 in shares or retain all profits to increase charter capital. Specific plan still needs to wait for approval of the management agency.
Nevertheless, Q1 business results showed notable income movements of VietinBank. Although the outstanding credit decreased, its profit still improved thanks to the structure of the lending market which focuses on the segments with high NIM. In addition, the bank’s profit from services also surged in the period. VietinBank’s general director said that shareholders can be assured as the bank has no plan to withdraw accrued interests this year. Previously, the withdrawal of accrued interests in Q4 2018 was one of the main reasons for the bank’s loss.
According to BVSC, the asset quality of VietinBank has been much improved with forecasted bad debt ratio of 1.3 percent and Loan Life Coverage Ratio (LLCR) of above 100%. The bank’s risk provisioning is predicted to decline in 2019.
Techcombank posted Q1 pre-tax profit at 2.617 trillion dong, slightly up by two percent compared to the same period of 2018. Notably, this result is partly thanks to the significant decline of 80 percent in risk provisioning expenses. Meanwhile, the bank’s net profit fell compared to the same period of 2018 because the unexpected income from the capital contribution to buy shares.
BVSC said that Techcombank can complete the plan set in 2019, partly because the bank’s Loan-to-Deposit Ratio (LDR) is only 65.5 percent and thanks to that the NIM may continue to be improved. In addition, BVSC also expects that Techcombank will be approved to expand credit higher than the 13 percent plan if it early applies Circular 41.
Provisioning for risks is one of the most concerned factors for BIDV. The bank has the highest net profit in the system, but is also one of the banks with the highest provisioning rate. In Q1, BIDV’s provisions for risks reached up to 5.187 trillion dong, “eroding” 67 percent of the bank’s profit.
At the AGM of BIDV, Chair of BIDV’s Board of directors Phan Duc Tu said that the bank plans to set aside 20.2 trillion dong for risk provisioning this year. The bank also expects to soon clear off the special bonds at Vietnam Asset Management Company (VAMC).
BVSC said that if BIDV successfully carries out private placement this year, the bank can quickly expand its lending portfolio. Nevertheless, the issuance plan for KEB Hana Bank still has some obstacles.
VPBank targets 9.5 trillion dong in pre-tax profit this year, and it has completed 19 percent of the target after Q1. The bank’s profit may surge from the second half of the year, similar to 2018. However, many shareholders are also concerned that VPBank will be affected and difficult to maintain the performance recorded in the previous years when the consumer credit is tightened.
VPBank’s general director Nguyen Duc Vinh said that the profit growth in Q1 2019 looks low (three percent) but it actually reaches 14 percent if excluding the extraordinary income in 2018 from AIA insurance (more than 800 billion dong). For the parent bank alone, the profit growth target is over 20%, increasing from above four trillion dong to 5.1 trillion dong. The bank’s leader said that FE Credit continues to be considered a pillar of development.
MBBank sets a goal to attain a consolidated profit of 9.560 trillion dong, in which 8.345 trillion dong for the parent bank alone. Accordingly, the bank’s subsidiary units are expected to contribute over 1.2 trillion dong of pre-tax profit, up by 65 percent compared to 2018.
Subsidiaries are playing an important role in MBBank’s growth motivation. The income from services in Q1 2019 of MBBank significantly rose by 141 percent thanks to the growth of insurance segment.
MBBank currently has two member companies which are insurance units, including MIC and MB Ageas Life. The bank also has a finance company MB Shinsei which operates in consumer credit segment, striving to become one of the top five consumer finance companies in the market in terms of scale and operational efficiency.
Although Agribank is unobtrusive, other banks should also be cautious. The profit target of Agribank this year is only after Vietcombank’s and Techcombank’s, higher than VietinBank’s, although Agribank was rarely on the same level with three remaining state-owned banks in terms of profit.
Closing the year 2018, Agribank impressed the market by posting a pre-tax profit of 7.525 trillion dong, much higher than the 5.7 trillion dong plan set previously. Compared to the 5.018 trillion dong in 2017, the profit growth in 2018 of Agribank grew by up to 50%.
Agribank continues to lead the market in terms of total assets, outstanding credit, residential deposits and large network. In 2018, Agribank recovered nearly 12 trillion dong of the sold and risk-handled debts. With nearly 26 trillion dong of debts of which risks were provisioned, Agribank is confident to be able to repurchase all the debts sold to Vietnam Asset Management Company (VAMC) and promptly handle any bad debts arising in 2019.
The bank is also speeding up the steps to transform its operating model into a joint stock commercial bank, attracting strategic investors and striving to carry out the Initial Public Offering (IPO) as soon as possible.
