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|LienVietPostBank estimated its pre-tax profit in the second quarter of 2017 to double last year's figure|
|Real estate lending disguised as consumer lending|
|Consumer loans rise nearly 30% by end May|
|Auto lending growing rapidly in Viet Nam|
|PM calls for lending rate reduction in favor of businesses|
|Banks’ appetite for real estate lending drives up interest rates|
Small-scale banks speed away
According to a leader of LienVietPostBank, in the second quarter of 2017, the bank estimated its pre-tax profit at around VND900 billion ($39.6 million), nearly double the figure of the same period last year (VND467 billion—$20.5 million).
Similarly, Nguyen Hung, general director of Tien Phong Commercial Joint Stock Bank (TPBank), said that in the second quarter of 2017, TPBank’s total assets were estimated to be about VND110 trillion ($4.84 billion). Its deposit and credit growth in this period were about 10 per cent, and bad debts remained at a low level. The bank’s pre-tax profit in this period was VND500 billion ($22 million). In the same period last year, TBBank’s profit (including risk provisions) was VND205 billion ($9 million).
Meanwhile, Bank of Investment and Development of Vietnam (BIDV) reported stable operating results in the first five months of 2017. In particular, during this period, its credit balance and deposits were VND788.6 trillion ($34.7 billion) and VND826.5 trillion ($36.4 billion), an increase of 6.94 and 4 per cent, respectively, against the beginning of 2017.
BIDV’s net income from services in this period was VND1.730 trillion ($76.1 million), an increase of 21 per cent on-year. BIDV’s pre-tax profit in the first five months of the year was estimated at VND3.2 trillion ($140.8 million), an equivalent of 41 per cent of the annual target. BIDV targeted a profit of VND7.75 trillion ($341 million) in 2017.
In the first five months of 2017, BIDV’s subsidiaries stuck to their pre-tax profit targets. For example, BIDV Insurance Corporation (BIC) earned a pre-tax profit of VND85 billion ($3.74 million), 9 per cent more than in the same period last year, completing 45 per cent of the 2017 target. BIDV Securities Joint Stock Company (BSC) earned VND50 billion ($2.2 million), making up 55 per cent of its annual target.
Previously, in the first quarter of 2017, other commercial banks also reported profits. Some of them reported trillions of VND in profit, such as Joint Stock Commercial Bank for Foreign Trade of Vietnam (Vietcombank), Vietnam Joint Stock Commercial Bank for Industry and Trade (VietinBank), BIDV, Vietnam Prosperity Joint Stock Commercial Bank (VPBank), Vietnam Technological and Commercial Joint Bank (Techcombank), and Military Bank (MB).
Regarding profit growth, LienVietPostBank is at the top position. Other banks that also produced high profit growth are Vietcombank, Techcombank, VPBank, and MB.
Rising banking stocks
Although commercial banks’ profit in the first quarter and in the first six months of 2017 increased, their profitability ratios have not improved. According to the National Financial Supervisory Commission (NFSC), the return on assets (ROA) and return on equity (ROE) of the Vietnamese credit system in 2016 were 0.54 and 7.87 per cent, respectively. Even for banks that operate more efficiently, ROA and ROE were just about 1 and 10-11 per cent, respectively.
However, in the last few months, banking stocks have increased sharply. Some tickers increased by 20-100 per cent. A wide range of securities companies encouraged investors to purchase banking stocks, including banks which are implementing their restructuring plans.
Not only in the listed stock exchanges, but in the OTC market as well, the price of many banking stocks, such as VPBank, LienVietPostBank, and TechcomBank, also rose sharply. According to NFSC, high expectations on the Draft Resolution on Bad Debt Settlement have raised banking stock prices.
Many experts warned that the Vietnamese banking industry may not have short-term growth prospects, even when the Resolution on Bad Debt Settlement is enacted. Banks’ growth is not stable, especially when their bad debts are left abandoned and grow large enough to pose a threat to banks’ profit at any time.
Dr Le Xuan Nghia, an economist, said that profitability ratios of the banking industry will remain at a low level until there is a mechanism strong enough to deal with this problem.