Banks Slash Profit Targets

For that reason, Vietnamese banks gradually revised down their profit targets. Notably, small and medium-sized banks have trouble meeting 40 per cent of profit targets initially set for this year.

 

According to financial statements released by joint stock banks, most banks saw a sharp decline in profits. Only Vietnam Joint Stock Commercial Bank for Industry and Trade (VietinBank) said in its third quarter financial report that profits did not drop from the same period in 2011. In the year ending in the third quarter, the lender earned VND6,000 billion in the three first quarters to complete 66 per cent of the full-year profit target of VND9,000 billion. However, the bank has sought its shareholders for favour to adjust some business indicators in 2012, including profit targets, due to poor credit growth.

 

Vietnam Export Import Commercial Joint Stock Bank (Eximbank) said its credit declined more than 10 per cent and bad debts were 1.8 per cent. Truong Van Phuoc, General Director of Eximbank, said, despite much effort, Eximbank is likely to reach just 70 per cent of the annual profit target.

 

Asia Commercial Bank (ACB), a well-performing lender in previous years in terms of profitability growth, is likely to fail to fulfil the pre-tax profit target of VND5,500 billion in 2012 because it suffered a loss of VND1,251 billion in the third quarter from gold trading, which left total profit before tax at just VND1,181 billion in the first nine months of the year.

 

Sai Gon Thuong Tin Commercial Joint Stock Bank (Sacombank) reported it met 70 per cent of the full-year profit target of VND3,400 billion in the first 10 months of 2012. However, Mr Phan Huy Khang, CEO of Sacombank, said the HCM City-based lender is likely to complete only 75 per cent of the yearly profit plan because risk provisions amount at VND1,200 billion.

 

Tran Phuong Binh, General Director of Dong A Bank, said it is very hard for banks to fulfil initial earnings targets this year. He said sluggish credit growth and growing bad debt weaken customers’ solvency which is caused by slowing sales.

 

DongA Bank expected this year’s pre-tax profit at VND1,500 billion but it earned just VND1,000 billion in the first nine months of the year. But he said if bad debts do not decline from now until the end of the year and the bank must set aside provisions, profit targets would be difficult to achieve.

 

Nguyen Hoang Minh, deputy director of HCM City Branch of the State Bank of Vietnam (SBV), said that banks will find it hard to complete this year’s earnings targets because unfavourable markets force them to avert risks and slow credit growth - their major business operations.

 

"This year’s profitability of HCM City-based banks is likely to equal 27 - 30 per cent of the previous year because of rising bad debts," he added.