Banks Reap Impressive Profits

Most impressively, Joint Stock Commercial Bank for Investment and Development of Vietnam (BIDV) reported a profit of VND5,535 billion in the first nine months of the year, up nearly 25 percent from a year earlier.

After the merger with Mekong Housing Bank (MHB) as guided by the State Bank of Vietnam (SBV), BIDV stabilised business operations and achieved positive results in the first nine months. By the end of September 2015, the lender’s total assets reached VND786 trillion, to rank among top banks by scale and growth.

 

BIDV’s outstanding credit exceeded VND570 trillion, representing a year-to-date growth of 15 percent, the highest of the sector, and securing a market share of 12.9 percent, up 1.3 percent from 2014. Currently, BIDV is leading the market by net service revenue, recording the year-on-year growth of 26 percent. This source of income is little dependent on credit operations, but technology-driven service lines like payment, card and electronic banking.

Joint Stock Commercial Bank for Foreign Trade of Vietnam (Vietcombank) earned VND4,528 billion of pre-tax profit in the first nine months. Vietcombank’s bad debts plunged sharply to VND7,776 billion as of September 30, compared with nearly VND9 trillion at the end of the first quarter of 2015. Bad debt ratio fell to 2.1 percent after rising to nearly 3 percent earlier this year.

 

A substantial drop in non-performing loans (NPL) was cited as a drive to the huge profit of VCB. This positively impacted the giant lender’s business results as provisions were reversed. Settling bad debt was the bright spot of the bank. In the January - September period, the lender’s accumulated off-balance debt was VND1,313 billion, of which VND1,024 billion was collected by the reversal of risk provisions, and VND289 billion came from debts sold to the Vietnam Asset Management Company (VAMC). In the nine-month period, the total profit excluding provision reversion jumped up to 25.6 percent over the corresponding period of 2014, but the growth was 12.3 percent when provisions were set aside. Vietcombank’s deposit growth was 15.5 percent from the end of 2014 and outstanding loans climbed 12 percent.

 

A number of banks also announced positive earnings reports in the first nine months. Asia Commercial Bank (ACB) made more than VND1,029 billion of profit before tax after risks were provisioned. In addition to settling bad debts, earnings drives in the first three quarters came from improved credit growth and interest rates applicable to new loans decreased to a reasonable level of 7.5 to 8 percent per annum.

 

Currently, ACB brought the non-performing loan ratio down to 1.7 percent by the end of September 2015. ACB sold VND2 trillion of bad debts to VAMC since the end of 2014.

 

Military Bank (MB) also yielded an impressive profit. The lender posted a VND2,400 billion profit before tax from January to September, fulfilling 76 percent of the full-year target. In 2015, MB targeted a consolidated profit of VND3,250 billion, of which the parent bank fetched VND3,150 billion.

 

Good credit operations contributed positively to MB’s profits, although the settlement of bad debts has not reached expectations. For the time being, bad debt ratio was reduced to less than 3 percent, while credit growth approximated 12.7 percent.

 

From banks’ reports, the sharply slashed bad debt ratio positively boosted profit this year. The real estate market recovery helped reduce a part of bad debts. The drastic debt sale to VAMC was key in bringing down bad debt ratios of banks. According to the central bank, currently 98 percent of bad debts have been settled - an extremely impressive figure. By the end of September, the NPL ratio fell to 2.93 percent from 17 percent in 2012, said Nguyen Huu Nghia, Chief Inspector of the SBV.

 

However, bad debts have not really been treated completed. Most of bad debts were sold to VAMC, proximately 45 percent. VAMC purchased VND225 trillion (US$10 billion) from 139 credit institutions. Loan classification and reselling plan is an urgent but difficult task for this agency.